Republic of the Philippines The petitioner filed with the then Court of First Instance of Cebu, Branch XVI,

SUPREME COURT Lapu-Lapu City, a complaint for expropriation with a prayer for the issuance
Manila of a writ of possession against the private respondent, to expropriate the
aforesaid parcels of land pursuant to P.D. No. 66, as amended, which
EN BANC empowers the petitioner to acquire by condemnation proceedings any
property for the establishment of export processing zones, in relation to
G.R. No. L-59603 April 29, 1987 Proclamation No. 1811, for the purpose of establishing the Mactan Export
Processing Zone.
EXPORT PROCESSING ZONE AUTHORITY, petitioner,
vs. On October 21, 1980, the respondent judge issued a writ of possession
HON. CEFERINO E. DULAY, in his capacity as the Presiding Judge, Court authorizing the petitioner to take immediate possession of the premises. On
of First Instance of Cebu, Branch XVI, Lapu-Lapu City, and SAN ANTONIO December 23, 1980, the private respondent flied its answer.
DEVELOPMENT CORPORATION, respondents.
Elena M. Cuevas for respondents. At the pre-trial conference on February 13, 1981, the respondent judge issued
an order stating that the parties have agreed that the only issue to be resolved
GUTIERREZ, JR., J.: is the just compensation for the properties and that the pre-trial is thereby
terminated and the hearing on the merits is set on April 2, 1981.
The question raised in this petition is whether or not Presidential Decrees
Numbered 76, 464, 794 and 1533 have repealed and superseded Sections 5 to On February 17, 1981, the respondent judge issued the order of condemnation
8 of Rule 67 of the Revised Rules of Court, such that in determining the just declaring the petitioner as having the lawful right to take the properties sought
compensation of property in an expropriation case, the only basis should be to be condemned, upon the payment of just compensation to be determined
its market value as declared by the owner or as determined by the assessor, as of the filing of the complaint. The respondent judge also issued a second
whichever is lower. order, subject of this petition, appointing certain persons as commissioners to
ascertain and report to the court the just compensation for the properties
On January 15, 1979, the President of the Philippines, issued Proclamation No. sought to be expropriated.
1811, reserving a certain parcel of land of the public domain situated in the
City of Lapu-Lapu, Island of Mactan, Cebu and covering a total area of On June 19, 1981, the three commissioners submitted their consolidated report
1,193,669 square meters, more or less, for the establishment of an export recommending the amount of P15.00 per square meter as the fair and
processing zone by petitioner Export Processing Zone Authority (EPZA). reasonable value of just compensation for the properties.

Not all the reserved area, however, was public land. The proclamation
included, among others, four (4) parcels of land with an aggregate area of
22,328 square meters owned and registered in the name of the private
respondent. The petitioner, therefore, offered to purchase the parcels of land
from the respondent in acccordance with the valuation set forth in Section 92,
Presidential Decree (P.D.) No. 464, as amended. The parties failed to reach an
agreement regarding the sale of the property.
On July 29, 1981, the petitioner Med a Motion for Reconsideration of the order
of February 19, 1981 and Objection to Commissioner's Report on the grounds
that P.D. No. 1533 has superseded Sections 5 to 8 of Rule 67 of the Rules of
Court on the ascertainment of just compensation through commissioners; and
that the compensation must not exceed the maximum amount set by P.D. No.
1533.
On November 14, 1981, the trial court denied the petitioner's motion for
reconsideration and gave the latter ten (10) days within which to file its
objection to the Commissioner's Report.
On February 9, 1982, the petitioner flied this present petition for certiorari and
mandamus with preliminary restraining order, enjoining the trial court from
enforcing the order dated February 17, 1981 and from further proceeding with
the hearing of the expropriation case.
The only issue raised in this petition is whether or not Sections 5 to 8, Rule 67
of the Revised Rules of Court had been repealed or deemed amended by P.D.
No. 1533 insofar as the appointment of commissioners to determine the just
compensation is concerned. Stated in another way, is the exclusive and
mandatory mode of determining just compensation in P.D. No. 1533 valid and
constitutional?
The petitioner maintains that the respondent judge acted in excess of his
jurisdiction and with grave abuse of discretion in denying the petitioner's
motion for reconsideration and in setting the commissioner's report for
hearing because under P.D. No. 1533, which is the applicable law herein, the
basis of just compensation shall be the fair and current market value declared
by the owner of the property sought to be expropriated or such market value
as determined by the assessor, whichever is lower. Therefore, there is no more
need to appoint commissioners as prescribed by Rule 67 of the Revised Rules
of Court and for said commissioners to consider other highly variable factors
in order to determine just compensation. The petitioner further maintains that
P.D. No. 1533 has vested on the assessors and the property owners themselves
the power or duty to fix the market value of the properties and that said
property owners are given the full opportunity to be heard before the Local
Board of Assessment Appeals and the Central Board of Assessment Appeals.
Thus, the vesting on the assessor or the property owner of the right to
determine the just compensation in expropriation proceedings, with
appropriate procedure for appeal to higher administrative boards, is valid and
constitutional.
Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533, this Court has
interpreted the eminent domain provisions of the Constitution and
established the meaning, under the fundametal law, of just compensation and
who has the power to determine it. Thus, in the following cases, wherein the
filing of the expropriation proceedings were all commenced prior to the
promulgation of the aforementioned decrees, we laid down the doctrine
onjust compensation:
Municipality of Daet v. Court of Appeals (93 SCRA 503, 516),
xxx xxx xxx
"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31
SCRA 413, the Court, speaking thru now Chief Justice Fernando, reiterated the
'well-settled (rule) that just compensation means the equivalent for the value
of the property at the time of its taking. Anything beyond that is more and
anything short of that is less, than just compensation. It means a fair and full
equivalent for the loss sustained, which is the measure of the indemnity, not
whatever gain would accrue to the expropriating entity."
Garcia v. Court ofappeals (102 SCRA 597, 608),
xxx xxx xxx
"Hence, in estimating the market value, all the capabilities of the
property and all the uses to which it may be applied or for which it is
adapted are to be considered and not merely the condition it is in the
time and the use to which it is then applied by the owner. All the facts
as to the condition of the property and its surroundings, its
improvements and capabilities may be shown and considered in
estimating its value."
Republic v. Santos (141 SCRA 30, 35-36),
"According to section 8 of Rule 67, the court is not bound by the
commissioners' report. It may make such order or render such
judgment as shall secure to the plaintiff the property essential to the
exercise of his right of condemnation, and to the defendant just
compensation for the property expropriated. This Court may
 substitute its own estimate of the value as gathered from the record
(Manila Railroad Company v. Velasquez, 32 Phil. 286)."
However, the promulgation of the aforementioned decrees practically set
aside the above and many other precedents hammered out in the course of
evidence-laden, well argued, fully heard, studiously deliberated, and
judiciously considered court proceedings. The decrees categorically and
peremptorily limited the definition of just compensation thus:
P.D. No. 76:
xxx xxx xxx
"For purposes of just compensation in cases of private property
acquired by the government for public use, the basis shall be the
current and fair market value declared by the owner or administrator,
or such market value as determined by the Assessor, whichever is
lower."
P.D. No. 464:
"Section 92. Basis for payment of just compensation in expropriation
proceedings. In determining just compensation which private
property is acquired by the government for public use, the basis shall
be the market value declared by the owner or administrator or anyone
having legal interest in the property, or such market value as
determined by the assessor, whichever is lower."
P.D. No. 794:
"Section 92. Basis for payment of just compensation in expropriation
proceedings. In determining just compensation when private
property is acquired by the government for public use, the same shall
not exceed the market value declared by the owner or administrator
or anyone having legal interest in the property, or such market value
as determined by the assessor, whichever is lower."
P.D. No. 1533:
"Section 1. In determining just compensation for private property
acquired through eminent domain proceedings, the compensation to
be paid shall not exceed the value declared by the owner or
administrator or anyone having legal interest in the property or
determined by the assessor, pursuant to the Real Property Tax Code,
whichever value is lower, prior to the recommendation or decision of
the appropriate Government office to acquire the property."
We are constrained to declare the provisions of the Decrees on just
compensation unconstitutional and void and accordingly dismiss the instant
petition for lack of merit.
The method of ascertaining just compensation under the aforecited decrees
constitutes impermissible encroachment on judicial prerogatives. It tends to
render this Court inutile in a matter which under the Constitution is reserved
to it for final determination.
Thus, although in an expropriation proceeding the court technically would
still have the power to determine the just compensation for the property,
following the applicable decrees, its task would be relegated to simply stating
the lower value of the property as declared either by the owner or the assessor.
As a necessary consequence, it would be useless for the court to appoint
commissioners under Rule 67 of the Rules of Court. Moreover, the need to
satisfy the due process clause in the taking of private property is seemingly
fulfilled since it cannot be said that a judicial proceeding was not had before
the actual taking. However, the strict application of the decrees during the
proceedings would be nothing short of a mere formality or charade as the
court has only to choose between the valuation of the owner and that of the
assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or
fair. Even a grade school pupil could substitute for the judge insofar as the
determination of constitutional just compensation is concerned.
In the case of National Housing Authority v. Reyes (123 SCRA 245), this Court
upheld P.D. No. 464, as further amended by P.D. Nos. 794, 1224 and 1259. In
this case, the petitioner National Housing Authority contended that the
owner's declaration at P1,400.00 which happened to be lower than the
assessor's assessment, is the just compensation for the respondent's property
under section 92 of P.D. No. 464. On the other hand, the private respondent
stressed that while there may be basis for the allegation that the respondent
judge did not follow the decree, the matter is still subject to his final
disposition, he having been vested with the original and competent authority
to exercise his judicial discretion in the light of the constitutional clauses on
due process and equal protection.
To these opposing arguments, this Court ruled ihat under the conceded facts,
there should be a recognition that the law as it stands must be applied; that
the decree having spoken so clearly and unequivocably calls for obedience;
and that on a matter where the applicable law speaks in no uncertain
language, the Court has no choice except to yield to its command. We further
stated that "the courts should recognize that the rule introduced by P.D. No.
76 and reiterated in subsequent decrees does not upset the established
concepts of justice or the constitutional provision on just compensation for,
precisely, the owner is allowed to make his own valuation of his property."
While the Court yielded to executive prerogative exercised in the form of
absolute law-making power, its members, nonetheless, remained
uncomfortable with the implications of the decision and the abuse and
unfairness which might follow in its wake. For one thing, the President himself
did not seem assured or confident with his own enactment. It was not enough
to lay down the law on determination of just compensation in P.D. 76. It had
to be repeated and reiterated in P.D. 464, P.D. 794, and P.D. 1533. The
provision is also found in P.D. 1224, P.D. 1259 and P.D. 1313. Inspite of its
effectivity as general law and the wide publicity given to it, the questioned
provision or an even stricter version had to be embodied in cases of specific
expropriations by decree as in P.D. 1669 expropriating the Tambunting Estate
and P.D. 1670 expropriating the Sunog Apog area in Tondo, Manila.
In the present petition, we are once again confronted with the same question
of whether the courts under P.D. 1533, which contains the same provision on
just compensation as its predecessor decrees, still have the power and
authority to determine just compensation, independent of what is stated by
the decree and to this effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
In overruling the petitioner's motion for reconsideration and objection to the
commissioner's report, the trial court said:
"Another consideration why the Court is empowered to appoint
commissioners to assess the just compensation of these properties
under eminent domain proceedings, is the well-entrenched ruling
that 'the owner of property expropriated is entitled to recover from
expropriating authority the fair and full value of the lot, as of the time
when possession thereof was actually taken by the province, plus
consequential damages including attorney's fees from which the
consequential benefits, if any should be deducted, with interest at the
legal rate, on the aggregate sum due to the owner from and after the
date of actual taking.' (Capitol Subdivision, Inc. v. Province of Negros
Occidental, 7 SCRA 60). In fine, the decree only establishes a uniform
basis for determining just compensation which the Court may
consider as one of the factors in arriving at 'just compensation,' as
envisage in the Constitution. In the words of Justice Barredo,
"Respondent court's invocation of General Order No. 3 of September
21, 1972 is nothing short of an unwarranted abdication of judicial
authority, which no judge duly imbued with the implications of the
paramount principle of independence of the judiciary should ever
think of doing." (Lina v. Purisima, 82 SCRA 344, 351; Cf. Prov. of
Pangasinan v. CFI Judge of Pangasinan, Br. VIII, 80 SCRA 117) Indeed,
where this Court simply follows PD 1533, thereby limiting the
determination of just compensation on the value declared by the
owner or administrator or as determined by the Assessor, whichever
is lower, it may result in the deprivation of the landowner's right of
due process to enable it to prove its claim to just compensation, as
mandated by the Constitution. (Uy v. Genato, 57 SCRA 123). The tax
declaration under the Real Property Tax Code is, undoubtedly, for
purposes of taxation."
We are convinced and so rule that the trial court correctly stated that the
valuation in the decree may only serve as a guiding principle or one of the
factors in determining just compensation but it may not substitute the court's
own judgment as to what amount should be awarded and how to arrive at
such amount. A return to the earlier well-established doctrine, to our mind, is
more in keeping with the principle that the judiciary should live up to its
mission "by vitalizing and not denigrating constitutional rights." (See Salonga
v. Cruz Pao, 134 SCRA 438, 462; citing Mercado v. Court of First Instance of
Rizal, 116 SCRA 93.) The doctrine we enunciated in National Housing Authority
v. Reyes, supra, therefore, must necessarily be abandoned if we are to uphold
this Court's role as the guardian of the fundamental rights guaranteed by the
due process and equal protection clauses and as the final arbiter over
transgressions committed against constitutional rights.
The basic unfairness of the decrees is readily apparent.
Just compensation means the value of the property at the time of the taking. It
means a fair and full equivalent for the loss sustained. All the facts as to the
condition of the property and its surroundings, its improvements and
capabilities, should be considered.
In this particular case, the tax declarations presented by the petitioner as basis
for just compensation were made by the Lapu-Lapu municipal, later city
assessor long before martial law, when land was not only much cheaper but
when assessed values of properties were stated in figures constituting only a
fraction of their true market value. The private respondent was not even the
owner of the properties at the time. It purchased the lots for development
purposes. To peg the value of the lots on the basis of documents which are out
of date and at prices below the acquisition cost of present owners would be
arbitrary and confiscatory.
Various factors can come into play in the valuation of specific properties
singled out for expropriation. The values given by provincial assessors are
usually uniform for very wide areas covering several barrios or even an entire
town with the exception of the poblacion. Individual differences are never
taken into account. The value of land is based on such generalities as its
possible cultivation for rice, corn, coconuts, or other crops. Very often land
described as "cogonal" has been cultivated for generations. Buildings are
described in terms of only two or three classes of building materials and
estimates of areas are more often inaccurate than correct. Tax values can serve
as guides but cannot be absolute substitutes for just compensation.
To say that the owners are estopped to question the valuations made by
assessors since they had the opportunity to protest is illusory. The
overwhelming mass of land owners accept unquestioningly what is found in
the tax declarations prepared by local assessors or municipal clerks for them.
They do not even look at, much less analyze, the statements. The Idea of
expropriation simply never occurs until a demand is made or a case filed by
an agency authorized to do so.
It is violative of due process to deny to the owner the opportunity to prove
that the valuation in the tax documents is unfair or wrong. And it is repulsive
to basic concepts of justice and fairness to allow the haphazard work of a
minor bureaucrat or clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually viewed the
property, after evidence and arguments pro and con have been presented, and
after all factors and considerations essential to a fair and just determination
have been judiciously evaluated.
As was held in the case of Gideon v. Wainwright (93 ALR 2d,733,742):
"In the light of these and many other prior decisions of this Court, it is not
surprising that the Betts Court, when faced with the contention that 'one
charged with crime, who is unable to obtain counsel must be furnished
counsel by the State,' conceded that '[E]xpressions in the opinions of this court
lend color to the argument. . .' 316 U.S., at 462, 463, 86 L ed. 1602, 62 S Ct. 1252.
The fact is that in deciding as it did-that "appointment of counsel is not a
fundamental right, essential to a fair trial" the Court in Betts v. Brady made
an ubrupt brake with its own well-considered precedents. In returning to these
old precedents, sounder we believe than the new, we but restore constitutional
principles established to achieve a fair system of justice. . ."
We return to older and more sound precedents. This Court has the duty to
formulate guiding and controlling constitutional principles, precepts,
doctrines, or rules. (See Salonga v. Cruz Pano, supra).
The determination of "just compensation" in eminent domain cases is a judicial
function. The executive department or the legislature may make the initial
determinations but when a party claims a violation of the guarantee in the Bill
of Rights that private property may not be taken for public use without just
compensation, no statute, decree, or executive order can mandate that its own
determination shall prevail over the court's findings. Much less can the courts
be precluded from looking into the "just-ness" of the decreed compensation.

We, therefore, hold that P.D. No. 1533, which eliminates the court's discretion
to appoint commissioners pursuant to Rule 67 of the Rules of Court, is
unconstitutional and void. To hold otherwise would be to undermine the very
purpose why this Court exists in the first place.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby

DISMISSED. The temporary restraining order issued on February 16, 1982 is
LIFTED and SET ASIDE.

SO ORDERED.
Republic of the Philippines On October 27, 1994, plaintiff-appellant National Power Corporation
SUPREME COURT ("Napocor" x x x) filed a complaint for Eminent Domain against defendants-
Manila appellees Sps. R. Zabala & L. Baylon, Tomas Aguirre, Generosa de Leon and
Leonor Calub ("Spouses Zabala", "Aguirre" "de Leon", and "Calub,"
SECOND DIVISION respectively x x x) before the Regional Trial Court, Balanga City, Bataan
alleging that: defendants-appellees Spouses Zabala and Baylon, Aguirre, de
G.R. No. 173520 January 30, 2013 Leon, and Calub own parcels of land located in Balanga City, Bataan; it
urgently needed an easement of right of way over the affected areas for its 230
NATIONAL POWER CORPORATION, Petitioner, KV Limay-Hermosa Transmission Line[s]; the said parcels of land have
vs. neither been applied nor expropriated for any public use, and were selected
SPOUSES RODOLFO ZABALA and LILIA BAYLON, Respondents. in a manner compatible with the greatest public good and the least private
injury; it repeatedly negotiated with the defendants-appellees for the
DECISION acquisition of right of way easement over the said parcels of land but failed to
reach an agreement with the latter; it has the right to take or enter upon the
DEL CASTILLO, J.: possession of the subject properties pursuant to Presidential Decree No. 42,
which repealed Section 2, Rule 67 of the Rules of Court upon the filing of the
Legislative enactments, as well as executive issuances, fixing or providing fix expropriation complaint before the proper court or at anytime thereafter, after
the method of computing just compensation are tantamount to impermissible due notice to defendants-appellees, and upon deposit with the Philippine
encroachment on judicial prerogatives.1 Thus they are not binding on courts National Bank of the amount equal to the assessed value of the subject
and, at best, are treated as mere guidelines in ascertaining the amount of just properties for taxation purposes which is to be held by said bank subject to the
compensation.2 orders and final disposition of the court; and it is willing to deposit the
provisional value representing the said assessed value of the affected portions
This Petition for Review on Certiorari3 assails the July 10, 2006 Decision4 of the of the subject property x x x. It prayed for the issuance of a writ of possession
Court of Appeals (CA) in CA-G.R. CV No. 85396 which affirmed the June 28, authorizing it to enter and take possession of the subject property, to demolish
2004 Partial Decision5 of the Regional Trial Court (RTC), Branch 2, Balanga all the improvements x x x thereon, and to commence with the construction of
City in an eminent domain case,6 ordering petitioner National Power the transmission lines project on the subject properties, and to appoint not
Corporation ( Napocor) to pay respondents spouses Rodolfo Zabala and Lilia more than three (3) commissioners to ascertain and report the just
Baylon (spouses Zabala) just compensation ofP-150.00 per square meter for the compensation for the said easement of right of way.
6,820-square meter portion of the spouses' property which was traversed by
transmission lines of Napocor under its 230 KV Limay-Hermosa Permanent xxxx
Transmission Lines Project.
On January 11, 1995, defendant-appellee Spouses Zabala moved to dismiss the
Factual Antecedents complaint averring that: the Balanga City proper is already crowded and x x
x needs additional space to meet the housing requirements of the growing
The facts of this case as found by the CA and adopted by Napocor are as population; the only direction the city proper could expand is the side where
follows: their subject property is located; they incurred a considerable expense in the
preparatory development of the subject property into a subdivision to serve
the interest and well being of the growing population of Balanga; the said
growing need for housing and said preparatory development would
necessarily increase the value of the said property; the just compensation
would be higher if the proposed transmission lins of plaintiff-appellant
Napocor is installed or made to pass or traverse through their property rather
than through the parcels of land farther from the existing city proper and away
from their property which was tapped to meet the expansion requirements of
the Balanga City proper; the transfer of the proposed transmission lines from
their property to a farther location is more economical and less expensive to
plaintiff-appellant Napocor and it would better serve the interest of the people
of Balanga because said location is less developed, not needed for the
expansion requirements of Balanga City proper, the lots that would be
traversed command a lower price and less compensation would be paid by
plaintiff-appellant Napocor; the traversing of the transmission lines through
their property would impact negatively on the housing expansion in Balanga,
the high tension wires would endanger the life and limb of the inhabitants
within the area, and decrease the value of their subject property; the complaint
does not show that the installation of the proposed transmission wires on their
property is the most direct, practical and least burdensome means to achieve
public good; the assessed value of P1,636.89 stated in Tax Declaration No. 1646
is insufficient because it has been revised and cancelled by Tax Declaration
No. 11052 which shows a higher assessment value for the said property; and
plaintiff-appellant Napocor did not exert earnest efforts toward the direct
purchase of the needed portion of their property before filing a complaint
before the lower court.
On March 4, 1996 and March 7, 1996 plaintiff-appellant Napocor and
defendants-appellees Spouses Zabala filed their respective Pre-Trial Briefs.
On December 4, 1997, the Commissioners submitted their
Report/Recommendation fixing the just compensation for the use of
defendants-appellees Spouses Zabalas property as easement of right of way
at P150.00 per square meter without considering the consequential damages.
Plaintiff-appellant Napocor prayed in its Comment to the commissioners
report, that the report be recommitted to the commissioners for the
modification of the report and the substantiation of the same with reliable and
competent documentary evidence based on the value of the property at the
time of its taking. On their part, defendants-appellees Spouses Zabala prayed,
in the Comments, for the fixing of the just compensation at P250.00 per square
meter.
On February 25, 1998, the lower court recommitted the report to the
Commissioners for further report on the points raised by the parties.
On August 20, 2003, the Commissioners submitted their Final Report fixing
the just compensation at P500.00 per square meter.7
Since the Commissioners had already submitted their Final Report8 on the
valuation of the subject property, spouses Zabala moved for the resolution of
the case insofar as their property was concerned. Thus, on June 28, 2004, the
RTC rendered its Partial Decision,9 ruling that Napocor has the lawful
authority to take for public purpose and upon payment of just compensation
a portion of spouses Zabalas property. The RTC likewise ruled that since the
spouses Zabala were deprived of the beneficial use of their property, they are
entitled to the actual or basic value of their property. Thus, it fixed the just
compensation at P150.00 per square meter. The dispositive portion of the
RTCs Partial Decision reads:
WHEREFORE, premises considered, the Court having determined that
Napocor has a lawful right to take the subject properties in the exercise of the
power of eminent domain upon payment of just compensation, the petition is
hereby granted.
Accordingly, Napocor is hereby ordered to pay defendant Spouses Rodolfo
Zabala and Lilia Baylon the amount of Php 150.00 per square meter for the
6,820 square meters taken from the latters property, as the just compensation
fixed and recommended by the commissioners determined as of the date of
the taking of the property.
As regards x x x the properties of the other defendants, the determination of x
x x just compensation is hereby held in abeyance until the submission of the
commissioners report.
SO ORDERED.10
Napocor appealed to the CA. It argued that the Commissioners reports upon
which the RTC based the just compensation are not supported by
documentary evidence. Necessarily, therefore, the just compensation pegged
by the RTC at P150.00 per square meter also lacked basis. Napocor likewise
imputed error on the part of the RTC in not applying Section 3A of Republic
Act (RA) No. 639511 which limits its liability to easement fee of not more than
10% of the market value of the property traversed by its transmission lines.
On July 10, 2006, the CA rendered the assailed Decision affirming the RTCs
Partial Decision.
Issue
Hence, this Petition anchored on the ground that:
THE COURT OF APPEALS ERRED IN AFFIRMING THE PARTIAL
DECISION DATED JUNE 28, 2004 AND THE ORDER DATED FEBRUARY 7,
2005 OF THE TRIAL COURT FIXING THE AMOUNT OF P150.00 PER
SQUARE METER AS THE FAIR MARKET VALUE OF THE SUBJECT
PROPERTY SINCE THE SAME IS NOT SUPPORTED BY DOCUMENTARY
EVIDENCE.12
Napocor contends that under Section 3A of RA No. 6395, it is not required to
pay the full market value of the property when the principal purpose for
which it is actually devoted will not be impaired by its transmission lines. It is
enough for Napocor to pay easement fee which, under the aforementioned
law, should not exceed 10% of the market value of the affected property.
Napocor argues that when it installed its transmission lines, the property of
spouses Zabala was classified as riceland and was in fact devoted to the
cultivation of palay. Its transmission lines will not, therefore, affect the
primary purpose for which the subject land is devoted as the same only pass
through it. The towers to which such lines are connected are not even built on
the property of spouses Zabala, who will remain the owner of and continue to
enjoy their property. Hence, the RTC and the CA, according to Napocor, both
erred in not applying Section 3A of RA No. 6395.
Napocor further argues that even assuming that spouses Zabala are entitled
to the full market value of their property, the award of P150.00 per square
meter as just compensation lacks basis because the recommendation of the
Commissioners is not supported by documentary evidence.
Our Ruling
The petition is partially meritorious.
Section 3A of RA No. 6395 cannot
restrict the constitutional power of the
courts to determine just compensation.
In insisting that the just compensation cannot exceed 10% of the market value
of the affected property, Napocor relies heavily on Section 3A of RA No. 6395,
the pertinent portions of which read:
Sec. 3A. In acquiring private property or private property rights through
expropriation proceedings where the land or portion thereof will be traversed
by the transmission lines, only a right-of-way easement thereon shall be
acquired when the principal purpose for which such land is actually devoted
will not be impaired, and where the land itself or portion thereof will be
needed for the projects or works, such land or portion thereof as necessary
shall be acquired.
In determining the just compensation of the property or property sought to be
acquired through expropriation proceedings, the same shall:
(a) With respect to the acquired land or portion thereof, not to exceed
the market value declared by the owner or administrator or anyone
having legal interest in the property, or such market value as
determined by the assessor, whichever is lower.
(b) With respect to the acquired right-of-way easement over the land
or portion thereof, not to exceed ten percent (10%) of the market value
declared by the owner or administrator or anyone having legal
interest in the property, or such market value as determined by the
assessor whichever is lower.
xxxx
Just compensation has been defined as "the full and fair equivalent of the
property taken from its owner by the expropriator. The measure is not the
taker's gain, but the owners loss. The word just is used to qualify the
meaning of the word compensation and to convey thereby the idea that the
amount to be tendered for the property to be taken shall be real, substantial,
full and ample."13 The payment of just compensation for private property
taken for public use is guaranteed no less by our Constitution and is included
in the Bill of Rights.14 As such, no legislative enactments or executive issuances
can prevent the courts from determining whether the right of the property
owners to just compensation has been violated. It is a judicial function that
cannot "be usurped by any other branch or official of the government."15 Thus,
we have consistently ruled that statutes and executive issuances fixing or
providing for the method of computing just compensation are not binding on
courts and, at best, are treated as mere guidelines in ascertaining the amount
thereof.16 In National Power Corporation v. Bagui,17 where the same petitioner
also invoked the provisions of Section 3A of RA No. 6395, we held that:
Moreover, Section 3A-(b) of R.A. No. 6395, as amended, is not binding on the
Court. It has been repeatedly emphasized that the determination of just
compensation in eminent domain cases is a judicial function and that any
valuation for just compensation laid down in the statutes may serve only as a
guiding principle or one of the factors in determining just compensation but it
may not substitute the courts own judgment as to what amount should be
awarded and how to arrive at such amount.18
This ruling was reiterated in Republic v. Lubinao, 19 National Power
Corporation v. Tuazon20 and National Power Corporation v. Saludares21 and
continues to be the controlling doctrine. Notably, in all these cases, Napocor
likewise argued that it is liable to pay the property owners for the easement of
right-of-way only and not the full market value of the land traversed by its
transmission lines. But we uniformly held in those cases that since the high-
tension electric current passing through the transmission lines will
perpetually deprive the property owners of the normal use of their land, it is
only just and proper to require Napocor to recompense them for the full
market value of their property.
The just compensation of P150.00 per
square meter as fixed by the RTC is not
supported by evidence.
It has likewise been our consistent ruling that just compensation cannot be
arrived at arbitrarily. Several factors must be considered, such as, but not
limited to, acquisition cost, current market value of like properties, tax value
of the condemned property, its size, shape, and location. But before these
factors can be considered and given weight, the same must be supported by
documentary evidence.
In the case before us, it appears that the Commissioners November 28, 1997
Report/Recommendation22 is not supported by any documentary evidence.
There is nothing therein which would show that before arriving at the
recommended just compensation of P150.00, the Commissioners considered
documents relevant and pertinent thereto. Their Report/Recommendation
simply states that on November 17, 1997, the Commissioners conducted an
ocular inspection; that they interviewed persons in the locality; that the
adjacent properties have market value of P150.00 per square meter; and, that
the property of Nobel Philippine which is farther from the Roman Expressway
is being sold for P200.00 per square meter. No documentary evidence
whatsoever was presented to support their report that indeed the market
value of the adjacent properties are P150.00 and that of Nobel Philippine is
P200.00.
Napocor objected to the Report/Recommendation of the Commissioners and
pointed out that the same is not supported by documentary evidence. 23
spouses Zabala likewise commented thereon and argued that their property
should be valued at P250.00 per square meter.24 Accordingly, the RTC
recommitted the Report/Recommendation to the Commissioners for further
evaluation of the points raised by the parties.25
In April 1998, the Commissioners submitted a Supplemental Report. 26 Then
on August 20, 2003, the Commissioners submitted their Final Report27
recommending a compensation of P500.00 per square meter. But like their
earlier reports, the Commissioners Final Report lacks documentary support.
It reads:
1. Further ocular inspection was conducted on the property under
consideration of the Honorable Court.
2. To date the land is properly secured, contained and fenced with
concrete hollow blocks.
3. The property is not tenanted and the area covered and affected by
the transmission lines has not been tilled and planted x x x.
4. Upon inquiry from the landowners, the Sps. Rodolfo and Lilia
Zabala, they intimated that they are proposing to develop the
property into a subdivision, as they already fenced and contained the
area.
5. At present, another property which is very far from the Roman
Expressway was subdivided, known as the St. Elizabeth Country
Homes. Lots are being sold there at P1,700.00 per square meter.
6. The property of the Sps. Zabala is only some meters away from the
Roman Expressway compared to the St. Elizabeth Country Homes
which is very far from the highway.
7. Moreover, the other subdivisions, Maria Lourdes and Vicarville
which are within the vicinity sell their lots now ranging from
P1,800.00 per square meter to P2,500.00.
8. As already stated, the property of the Sps. Zabala is within the built-
up area classified as residential, commercial and industrial.
9. In its earlier reports in 1998, the commission recommended a just
compensation of P150.00 per square meter.
10. But considering the considerable lapse of time and increase in the
valuation of the properties within the area, the commissioners are
impelled to increase the recommended valuation to P500.00 per
square meter.
WHEREFORE, it is recommended to the Honorable Court that the owners of
the property affected and traversed by the transmission lines of the NPC be
compensated at P500.00 per square meter.28
In Republic v. Santos,29 we ruled that a commissioners land valuation which
is not based on any documentary evidence is manifestly hearsay and should
be disregarded by the court, viz:
The statement in the 1970 report of the commissioners that according to the
owners of adjoining lots the prices per square meter ranged from P150 to P200
and that subdivision lots in the vicinity were being sold at P85 to P120 a square
meter was not based on any documentary evidence. It is manifestly hearsay.
Moreover, those prices refer to 1970 or more than a year after the expropriation
was effected.30
The same ruling was arrived at in National Power Corporation v. Diato-
Bernal,31 where we overturned the ruling of the trial court and the CA
adopting the findings of the commissioners sans supporting documentary
evidence therefor. Thus:
It is evident that the above conclusions are highly speculative and devoid of
any actual and reliable basis. First, the market values of the subject propertys
neighboring lots were mere estimates and unsupported by any corroborative
documents, such as sworn declarations of realtors in the area concerned, tax
declarations or zonal valuation from the Bureau of Internal Revenue for the
contiguous residential dwellings and commercial establishments. The report
also failed to elaborate on how and by how much the community centers and
convenience facilities enhanced the value of respondents property. Finally,
the market sales data and price listings alluded to in the report were not even
appended thereto.32
Under Section 8,33 Rule 67 of the Rules of Court, the trial court may accept or
reject, whether in whole or in part, the commissioners report which is merely
advisory and recommendatory in character. It may also recommit the report
or set aside the same and appoint new commissioners. In the case before us,
however, in spite of the insufficient and flawed reports of the Commissioners
and Napocors objections thereto, the RTC eventually adopted the same. It
shrugged off Napocors protestations and limited itself to the reports
submitted by the Commissioners. It neither considered nor required the
submission of additional evidence to support the recommended P150.00 per
square meter just compensation. Ergo, insofar as just compensation is
concerned, we cannot sustain the RTCs Partial Decision for want of
documentary support.1wphi1

Lastly, it should be borne in mind that just compensation should be computed

based on the fair value of the subject property at the time of its taking or the
filing of the complaint, whichever came first.34 Since in this case the filing of
the eminent domain case came ahead of the taking, just compensation should
be based on the fair market value of spouses Zabalas property at the time of
the filing of Napocors Complaint on October 27, 1994 or thereabouts.

WHEREFORE, the instant Petition is PARTIALLY GRANTED. This case is

REMANDED to the Regional Trial Court, Branch 2, Balanga City for the
proper determination of just compensation.

SO ORDERED.
FIRST DIVISION

DECISION

REPUBLIC OF THE PHILIPPINES G.R. No. 160379

THROUGH THE DEPARTMENT CARPIO, J.:

OF PUBLIC WORKS AND

HIGHWAYS,
Petitioner, Present:
The Case

PUNO, C.J.,
Chairperson,
CARPIO, This is a petition for review1[1] of the Court of Appeals Decision2[2]
dated 15 November 2002 and Resolution dated 17 September 2003 in CA-G.R.
CORONA, CV No. 50358. The Court of Appeals affirmed with modifications the
Amended Decision of the Regional Trial Court of Cagayan de Oro City, Branch
- versus - LEONARDO-DE 19 (RTC).
CASTRO, and
The Antecedent Facts
BERSAMIN, JJ.

Private respondent Rosario Rodriguez Reyes is the absolute owner of

COURT OF APPEALS and ROSARIO Promulgated: a parcel of land identified as Lot 849-B and covered by TCT No. T-7194. The
RODRIGUEZ REYES, 1,043-square meter lot is situated on Claro M. Recto and Osmea Streets,
Respondents. August 14, 2009 Cagayan de Oro City.
x----------------------------------------------------------------------------------------- x
 On 6 November 1990, private respondent received a letter from In the same letter, private respondent requested the City Assessor for a
petitioner Republic of the Philippines, through the Department of Public reappraisal of her property, but said request was denied.4[4]
Works and Highways (DPWH), requesting permission to enter into a portion
of private respondents lot consisting of 663 square meters, and to begin
construction of the Osmea Street extension road. On 20 December 1990,
petitioner took possession of private respondents property without initiating On 17 March 1992 , private respondent filed with the Regional
expropriation proceedings. Consequently, on 4 and 7 January 1991, private Trial Court (RTC) of Cagayan de Oro City a complaint claiming just
respondent sent letters to the DPWH stating her objection to the taking of her compensation and damages against petitioner.
property. On 16 May 1991, private respondent sent a letter to the City
Appraisal Committee (CAC) rejecting the latters appraisal of the subject
property, to wit:3[3]
On 30 June 1993, the RTC appointed three commissioners 5 [5] to
determine the subject propertys fair market value, as well as the consequential
benefits and damages of its expropriation. On 15 September 1993, one of the
Declared Tax Market Value Recommended Description three commissioners, Provincial Assessor Corazon Beltran, submitted to the
Owner Declaration 1981 Schedule Appraised RTC a separate report, the dispositive portion of which reads:
No. Value
Rosario 90066 P400/sq.m. P4,000/sq.m. 1 to 20 meters
from Claro M.
WHEREFORE, the undersigned deems it only to be
Reyes Recto Super
just, fair and reasonable to adopt the market value of FOUR
Highway
THOUSAND PESOS (P4,000.00) per square meter as the
P3,200/sq.m. 21 to 40 meters highest price obtaining and prevailing in 1990, the time of the
from Claro M. taking of the property subject of the above entitled case, and
Recto Super fairly reasonable also to impose an additional value
Highway equivalent to 5% of the market value as fixed for severance
fee.6[6]
P2,400/sq.m. 41 to 60 meters
from Claro M.
Recto Super
Highway
 On 13 April 1994, the scheduled hearing was reset to 19 May 1994, to
give private respondent (plaintiff) time to consider the offer of petitioner
(defendant) to amicably settle the case and to accept the just compensation of
P3,200 per square meter, or a total of P2,212,600, for the 663-square meter
portion of private respondents lot.7[7]
On 16 May 1994, private respondent filed with the RTC an Urgent
Motion to Deposit The Amount of P2,121,600 in Court, alleging that
petitioners counsel previously manifested in open court that the amount of
P2,121,600 was ready for release should the amount be acceptable to private
respondent, and praying that said amount of P2,121,600 be deposited by
petitioner with the trial court.8[8] The RTC granted the motion in an Order
dated 16 June 1994. 9 [9] However, it was only on 21 October 1994 that
petitioner deposited with the RTC Clerk of Court a Landbank check
amounting to P2,121,600 as just compensation.10[10]
On 16 June 1994, the RTC ordered the commissioners to submit their
report as soon as possible, but until the scheduled hearing on 15 July 1994, the
commissioners still failed to submit their report. Upon motion of private
respondent, the RTC issued an order appointing a new set of
commissioners.11[11]
On 11 October 1994, the new commissioners submitted their report,
the pertinent portions of which provide, thus:
COMMISSIONERS REPORT
xxx
The property litigated upon is strategically located along Recto Avenue
(National Highway) which is a commercial district. Fronting it across the
national highway is the Cagayan Coca Cola Plant and the Shell Gasoline
Station. It adjoins an establishment known as the Palana Grocery Store and
after it is the Northern Mindanao Development Bank. Three Hundred (300)
meters to the west of plaintiffs property is the gigantic structure of the Gaisano
City department store along Recto Avenue and Corrales Avenue Extension.
Towards the eastern direction of the property are banking institution
buildings and the Ororama Superstore along the national highway (Recto
Avenue) and the Limketkai Commercial Complex.
For purpose of affording a fair assessment of the market value of plaintiffs
property, the herein Commissioners have divided the whole parcel of land
into three parts, viz:
1. Front portion along Recto Avenue
measuring 21.52 meters from south
to north ------------- 347.66 SQM
2. Middle portion with a measurement
of 21.52 meters ----------------------------
------------------ 347.66 SQM
 3. Rear/back portion with a
measurement of 21.52 meters --------- 1. Front Portion - P10,000.00 to
---------------------------- 347.66 SQM P12,000.00 per square meter;

2. Middle Portion- P8,000.00 to

TOTAL AREA: ------- 1,043 SQM P10,000.00 per square meter;

3. Rear Portion - P6,000.00 to P8,000.00

Taking into consideration, among others, the location
of the property and a research of the prevailing prices of lots
proximate to and/or near the vicinity of plaintiff's property,
the undersigned Commissioners respectfully recommend to
the Honorable Court the following valuation, to wit:
per square meter;
The undersigned Commissioners would however like to bring to the attention
of the Honorable Court that in the subdivision plan prepared by the City
Engineers Office, the whole of plaintiffs property was subdivided into three
(3) lots designated as follows:

(CURRENT VALUE)

1. Front portion along Recto Avenue

with a measurement of 21.52 meters
from south to north with an area of Lot 849-B-1 (Road Lot)-83 square meters;
347.66 square meters at P18,000.00 to
P20,000.00 per square meter;

2. Middle portion with a measurement Lot 849-B-2 (Road Lot traversed by the RCDP Osmea Extension Street)-663
of 21.52 meters containing an area of SQM;
347.66 square meters at P16,000.00 to
P18,000.00 per square meter;

3. Rear/back portion measuring 21.52 Lot 849-B-3 remaining portion with an area of 297 square meters;
meters with an area of 347.66 square
meters at P14,000.00 to P16,000.00
per square meter;
In effect, what has been taken over and used by the defendant is not only 663
square meters but 746 square meters, more or less, which includes Lot No. 849-
VALUATION AS OF 1990 B-1.
On the other hand, the remaining portion left to the plaintiff, Lot No. 849-B-3
will not actually be 297 square meters. If we deduct the setback area from
Osmea Extension Street, the usable/buildable area left to the plaintiff would
only be a little over 50 square meters. This portion would not command a good
price if sold. Neither is it ideal for purposes of any building construction
because aside from its being a very small strip of land, the shape is
triangular.12[12]
The Trial Courts Ruling
On 2 June 1995, the RTC rendered a Decision, the dispositive portion
of which reads:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff and against the defendants, declaring the
former as having the right to retain 590 square meters of the
property covered by TCT No. T-7194, and ordering the latter
to return 210 square meters of the 663 square meters taken;
that defendants are solidarily liable to pay the sum of
P5,526,000.00, the fair market value of 1990 (sic), as just
compensation for the 536 square meters taken for the Osmea
street extension; to pay P185,000.00 representing damages for
37 months computed at the rate of P5,000.00 per month from
the filing of this case; and Attorneys fees of P10,000.00 plus
costs of suit.
Plaintiff herein is ordered to forthwith defray the expenses to be
incurred in undertaking the road construction of the 210 square meters which
the defendants will later on provide along the right portion of her property.
SO ORDERED.13[13]
On 15 June 1995, the RTC rendered an Amended Decision with the
following dispositive portion, thus:
WHEREFORE, judgment is hereby rendered in favor
of the plaintiff and against the defendants, declaring the
former as having the right to retain 590 square meters of the
property covered by TCT No. T-7194, and ordering the latter
to return 293 square meters of the 746 square meters taken;
that defendants are solidarily liable to pay the sum of
P4,696,000.00, the fair market value of 1990 (sic), as just
compensation for the 453 square meters taken for the Osmea
Street extension; to pay P185,000.00 representing damages for
37 months computed at the rate of P5,000.00 per month from
the filing of this case; and Attorneys fees of P10,000.00 plus
costs of suit.
Plaintiff herein is ordered to forthwith defray the expenses to be
incurred in undertaking the road construction of the 293 square meters which
the defendants will later on provide along the right portion of her property.
 SO ORDERED.14[14]
The Court of Appeals Ruling
On appeal by petitioner, the Court of Appeals rendered
judgment,15[15] affirming with modifications the decision of the RTC. The
Court of Appeals found that the commissioners recommendations on just
compensation were not supported by valid documents. Also, it was unclear in
the RTC decision whether the trial court merely adopted the commissioners
recommendations or the court made its own independent valuation of the
subject property. Thus, the Court of Appeals held that a reconvening of the
commissioners or an appointment of new commissioners to determine just
compensation was necessary. The appellate court further held that the trial
courts order for petitioners return of the 293-square meter lot had no legal
basis and was no longer feasible since the lot was already part of the
completed Sergio Osmea extension road. Moreover, consequential damages
should be awarded in lieu of actual damages for private respondents alleged
loss of income from the remaining 297-square meter lot. We quote the
dispositive portion of the Court of Appeals decision below.
WHEREFORE , the appealed judgment is hereby
MODIFIED.
1. The case is REMANDED to the trial court
which is ordered to reconvene the commissioners or appoint
new commissioners to determine, in accordance with this
Decision, the amount of just compensation due to plaintiff-
appellee Rosario Rodriguez Reyes for the 746 square meters
of land taken from her and consequential damages to the 297-
square meter portion left.
2. Defendant-appellant DWPH 16[16] is ordered to
pay plaintiff-appellee the following amounts:
a. the balance, if any, of just compensation to
be finally determined after deducting the amount of
P2,161,600.0017[17] DPWH previously advanced and
deposited with the trial court;
b. 6% legal interest per annum on the amount
it provisionally deposited from the time of taking up
to the time it is deposited with the trial court on
October 21, 1994; and on the balance, if any, from the
time of taking on December 20, 1990 until fully paid;
c. attorneys fees of P20,000.00.
3. Defendant-appellant City Government of Cagayan de Oro is relieved from
any liability;
4. The award of P185,000.00 as actual damages is deleted;
5. No pronouncement as to costs.
 SO ORDERED.18[18] 2. Whether the Court of Appeals erred in ordering petitioner to pay
attorneys fees.

Petitioner filed a Motion for Reconsideration, but this was denied by

the Court of Appeals in its Resolution of 17 September 2003.19[19]

The Courts Ruling

Hence, this appeal.

We find the appeal unmeritorious.

The Issues On whether the Court of Appeals erred in ordering the

remand of the case to the trial court to order the reconvening

Petitioner raises the following issues: of the commissioners or appointment of new commissioners

to determine the consequential damages for the remaining

1. Whether the Court of Appeals erred in ordering the remand 297-square meter lot
of the case to the trial court, to order the reconvening of the
commissioners or appointment of new commissioners to
determine the consequential damages for the remaining 297-
square meter lot; and Eminent domain is the authority and right of the State, as sovereign,
to take private property for public use upon observance of due process of law
and payment ofjust compensation. 20 [20] The Constitution provides that,
[p]rivate property shall not be taken for public use without just
compensation.21[21]
Just compensation is the full and fair equivalent of the property
sought to be expropriated. 22 [22] Among the factors to be considered in
arriving at the fair market value of the property are the cost of acquisition, the
current value of like properties, its actual or potential uses, and in the
particular case of lands, their size, shape, location, and the tax declarations
thereon.23[23] The measure is not the takers gain but the owners loss.24[24]
To be just, the compensation must be fair not only to the owner but also to the
taker.25[25]
J ust compensation is based on the price or value of the property at the
time it was taken from the owner and appropriated by the government.26[26]
However, if the government takes possession before the institution of
expropriation proceedings, the value should be fixed as of the time of the
taking of said possession, not of the filing of the complaint. The value at the
time of the filing of the complaint should be the basis for the determination of
the value when the taking of the property involved coincides with or is
subsequent to the commencement of the proceedings.27[27]
The procedure for determining just compensation is set forth in Rule
67 of the 1997 Rules of Civil Procedure. Section 5 of Rule 67 partly states that
[u]pon the rendition of the order of expropriation, the court shall appoint not
more than three (3) competent and disinterested persons as commissioners to
ascertain and report to the court the just compensation for the property sought
to be taken. However, we held in Republic v. Court of Appeals28[28] that Rule
67 presupposes a prior filing of complaint for eminent domain with the
appropriate court by the expropriator. If no such complaint is filed, the
expropriator is considered to have violated procedural requirements, and
hence, waived the usual procedure prescribed in Rule 67, including the
appointment of commissioners to ascertain just compensation. 29 [29] In
National Power Corporation v. Court of Appeals,30[30] we clarified that when
there is no action for expropriation and the case involves only a complaint for
damages or just compensation, the provisions of the Rules of Court on
ascertainment of just compensation (i.e., provisions of Rule 67) are no longer
applicable, and a trial before commissioners is dispensable, thus:
In this case, NPC appropriated Pobres Property
without resort to expropriation proceedings. NPC dismissed
its own complaint for the second expropriation. At no point
did NPC institute expropriation proceedings for the lots
outside the 5,554 square-meter portion subject of the second
expropriation. The only issues that the trial court had to settle
were the amount of just compensation and damages that
NPC had to pay Pobre.
This case ceased to be an action for expropriation
when NPC dismissed its complaint for expropriation. Since
this case has been reduced to a simple case of recovery of
damages, the provisions of the Rules of Court on the
ascertainment of the just compensation to be paid were no
longer applicable. A trial before commissioners, for instance,
 was dispensable. 31 [31]
In this case, petitioner took possession of the subject property without
initiating expropriation proceedings. Consequently, private respondent filed
the instant case for just compensation and damages. To determine just
compensation, the trial court appointed three commissioners pursuant to
Section 5 of Rule 67 of the 1997 Rules of Civil Procedure. None of the parties
objected to such appointment.
The trial courts appointment of commissioners in this particular case
is not improper. The appointment was done mainly to aid the trial court in
determining just compensation, and it was not opposed by the parties.
Besides, the trial court is not bound by the commissioners recommended
valuation of the subject property. The court has the discretion on whether to
adopt the commissioners valuation or to substitute its own estimate of the
value as gathered from the records.32[32]
However, we agree with the appellate court that the trial courts
decision is not clear as to its basis for ascertaining just compensation. The trial
court mentioned in its decision the valuations in the reports of the City
Appraisal Committee and of the commissioners appointed pursuant to Rule
67. But whether the trial court considered these valuations in arriving at the
just compensation, or the court made its own independent valuation based on
the records, was obscure in the decision. The trial court simply gave the total
amount of just compensation due to the property owner without laying down
its basis. Thus, there is no way to determine whether the adjudged just
compensation is based on competent evidence. For this reason alone, a remand
of the case to the trial court for proper determination of just compensation is
in order. In National Power Corporation v. Bongbong, 33 [33] we held that
although the determination of just compensation lies within the trial courts
discretion, it should not be done arbitrarily or capriciously. The decision of the
trial court must be based on all established rules, correct legal principles, and
competent evidence.34[34] The court is proscribed from basing its judgment
on speculations and surmises.35[35]
Petitioner questions the appellate courts decision to remand the case
to determine the consequential damages for the remaining 297-square meter
lot of private respondent. Petitioner contends that no consequential damages
may be awarded as the remaining lot was not actually taken by the DPWH,
and to award consequential damages for the lot which was retained by the
owner is tantamount to unjust enrichment on the part of the latter.
Petitioners contention is unmeritorious.
No actual taking of the remaining portion of the real property is
necessary to grant consequential damages. If as a result of the expropriation
made by petitioner, the remaining lot (i.e., the 297-square meter lot) of private
respondent suffers from an impairment or decrease in value, consequential
damages may be awarded to private respondent. On the other hand, if the
expropriation results to benefits to the remaining lot of private respondent,
these consequential benefits 36 [36] may be deducted from the awarded
consequential damages, if any, or from the market value of the expropriated
property. We held in B.H. Berkenkotter & Co. v. Court of Appeals37[37] that:
To determine just compensation, the trial court
should first ascertain the market value of the property, to
which should be added the consequential damages after
deducting therefrom the consequential benefits which may
arise from the expropriation. If the consequential benefits
exceed the consequential damages, these items should be
disregarded altogether as the basic value of the property
should be paid in every case.
Section 6 of Rule 67 of the Rules of Civil Procedure provides:
x x x The commissioners shall assess the consequential
damages to the property not taken and deduct from such
consequential damages the consequential benefits to be
derived by the owner from the public use or purpose of the
property taken, the operation of its franchise by the
corporation or the carrying on of the business of the
corporation or person taking the property. But in no case shall
the consequential benefits assessed exceed the consequential
damages assessed, or the owner be deprived of the actual
value of his property so taken.
An award of consequential damages for property not taken is not
tantamount to unjust enrichment of the property owner. There is unjust
enrichment when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience.38[38] Article 22 of the Civil
Code provides that [e]very person who through an act of performance by
another, or any other means, acquires or comes into possession of something
at the expense of the latter without just or legal ground, shall return the same
to him. The principle of unjust enrichment under Article 22 requires two
conditions: (1) that a person is benefited without a valid basis or justification,
and (2) that such benefit is derived at anothers expense or damage. 39[39]
There is no unjust enrichment when the person who will benefit has a valid
claim to such benefit.40[40]
As stated, consequential damages are awarded if as a result of the
expropriation, the remaining property of the owner suffers from an
impairment or decrease in value. Thus, there is a valid basis for the grant of
consequential damages to the property owner, and no unjust enrichment can
result therefrom.
On whether the Court of Appeals erred
in ordering petitioner to pay attorneys fees.

The Court of Appeals did not err in granting attorneys fees to private
respondent. Article 2208(2) of the New Civil Code provides that attorneys fees
may be awarded:
appellees land. That their road contractor no longer has any
portion to work on except on plaintiff-appellees property is
no justification for the precipitate taking of her lot. It is
incumbent upon defendant-appellant DPWH to foresee
whether private lands will be affected by their project and to
file appropriate expropriation proceedings if necessary. They
did not do so. Thus, plaintiff-appellee was constrained to
institute the instant suit to protect her rights.42[42]

xxx
WHEREFORE, we DENY the petition. We AFFIRM the Court of
(2) When the defendants act or omission has compelled the Appeals Decision dated 15 November 2002 and Resolution dated 17
plaintiff to litigate with third persons or to incur expenses to protect September 2003 in CA-G.R. CV No. 50358.
his interest.

xxx
SO ORDERED.

Attorneys fees may be awarded by a court if one who claims it is

compelled to litigate with third persons or to incur expenses to protect ones
interest by reason of an unjustified act or omission on the part of the party
from whom it is sought. 41 [41] In this case, petitioner took possession of
private respondents real property without initiating expropriation
proceedings, and over the latters objection. As a result, private respondent was
compelled to litigate and incur expenses to protect her interests over her
property. Thus, the appellate courts award of attorneys fees is proper, viz:

We find, however, the award of attorneys fees in

plaintiff-appellees favor justified. x x x It is admitted that
defendant-appellant DPWH neglected to file the appropriate
expropriation proceedings before taking over plaintiff-
Republic of the Philippines 1. To Mita Lumampao, the sum of P20,000 minus P4,001.82
SUPREME COURT which she had already withdrawn plus P3,000 attorney's fees;
Manila and

THIRD DIVISION 2. Sebastian Cosculluela, the sum of P200,000.00 which is the

reasonable estimate of his actual and consequential loss by
G.R. No. 77765 August 15, 1988 reason of the taking of his 3 hectares of land, destruction of
the sugarcane therein and the reduce in the yield of his
SEBASTIAN COSCULLUELA, petitioner, sugarcane farm due to water lagging and seepage; plus
vs. attorney's fees of P10,000 and litigation expenses of P5,000.00.
THE HONORABLE COURT OF APPEALS and the REPUBLIC OF THE (p. 36, Rollo)
PHILIPPINES, represented by NATIONAL IRRIGATION
ADMINISTRATION, respondents. On appeal, the Court of Appeals modified the trial court's decision in that the
attorney's fees and litigation expenses were reduced from P10,000.00 and
Pio G. Villoso for petitioner. P5,000.00 to P5,000.00 and P2,500.00 respectively. The decision became final
and executory on September 21, 1985.

GUTIERREZ, JR., J.:
This is a petition for review on certiorari which seeks to set aside the decision
of the Court of Appeals nullifying the orders of the trial court on the ground
that said orders in effect, sought the enforcement of a writ of execution against
government funds. The petitioner contends that to set aside the writ of
execution would be an abridgment of his right to just compensation and due
process of law. The public respondents on the other hand, state that
government funds cannot be disbursed without proper appropriation and that
a writ of execution cannot legally issue against the State.
On March 8, 1976, the Republic of the Philippines filed a complaint with the
Court of First Instance of Iloilo to expropriate two parcels of land in the
municipality of Barotac, Iloilo owned by petitioner Sebastian Cosculluela and
one Mita Lumampao, for the construction of the canal network of the Barotac
Irrigation Project.
On May 7, 1986, on motion of the petitioner, the trial court ordered the
issuance of a writ of execution to implement the judgment of the appellate
court.
On August 11, 1986, the respondent Republic filed a motion to set aside the
order of May 7, 1986 as well as the writ of execution issued pursuant thereto,
contending that the funds of the National Irrigation Authority (NIA) are
government funds and therefore, cannot be disbursed without a government
appropriation.
On October 6, 1986, the lower court issued an order modifying its order of May
7, 1986, directing instead that the respondenit Republic deposit with the
Philippine National Bank (PNB) in the name of the petitioner, the amount
adjudged in favor of the latter.
The respondent filed a petition with the Court of Appeals to annul the orders
of May 7 and October 6, 1986.

On April 4, 1976, the trial court rendered a decision granting the expropriation On November 25, 1986, the appellate court rendered the questioned decision
and ordered the public respondent to pay the following amounts: setting aside the aforementioned orders of the trial court on the ground that
public or government funds are not subject to levy and execution.
In this instant petition, the petitioner assails the decision of the appellate court
as being violative of his right to just compensation and due process of law. He
maintains that these constitutional guarantees transcend all administrative
and procedural laws and jurisprudence for as between these said laws and the
constitutional rights of private citizens, the latter must prevail.
As admitted by the respondent Republic, the NIA took possession of the
expropriated property in 1975 and for around ten (10) years already, it has
been servicing the farmers on both sides of the Barotac Viejo Irrigation Project
in Iloilo Province and has been collecting fees therefor by way of taxes at the
expense of the petitioner. On the other hand, the petitioner, who is already
more than eighty (80) years old and sickly, is undergoing frequent
hospitalization, and is made to suffer further by the unconscionable delay in
the payment of just compensation based on a final and executory judgment.
The respondent Republic, on the other hand, argues that while it has no
intention of keeping the land and dishonoring the judgment, the manner by
which the same will have to be satisfied must not be inconsistent with
prevailing jurisprudence, and that is, that public funds such as those of the
respondent NIA cannot be disbursed without the proper appropriation.
We rule for the petitioner.
One of the basic principles enshrined in our Constitution is that no person
shall be deprived of his private property without due process of law; and in
expropriation cases, an essential element of due process is that there must be
just compensation whenever private property is taken for public use. Thus, in
the case of Province of Pangasinan v. CFI Judge of Pangasinan, Branch VIII (80
SCRA 117, 120-121), this Court speaking through then Chief Justice Fernando
ruled:
There is full and ample recognition of the power of eminent
domain by Justice Street in a leading case of Visayan Refining
Co. v. Camus (4C) Phil. 550 [1919]) decided prior to the
Commonwealth, the matter being governed by the Philippine
Autonomy Act of 1916, otherwise known as the Jones Law. It
was characterized as "inseparable from sovereignty being
essential to the existence of the State and inherent in
government even in its most primitive forms." (Ibid, 558)
Nonetheless, he was careful to point out: "In other words, the
provisions now generally found in the modern laws of
constitutions of civilized countries to the effect that private
property shall not be taken for public use without just
compensation have their origin in the recognition of a
necessity for restraining the sovereign and protecting the
individual. (Ibid, 559) Moreover, he did emphasize:
"Nevertheless it should be noted that the whole problem of
expropriation is resolvable in its ultimate analysis into a
constitutional question of due process of law. ... Even were
there no organic or constitutional provision in force requiring
compensation to be paid, the seizure of one's property
without payment, even though intended for a public use,
would undoubtedly be held to be a taking without due
process of law and a denial of the equal protection of the laws.
That aspect of the matter was stressed in the recent case of J.
M. Tuason and Co., Inc. v. Land Tenure Administration. (31 SCRA
413) Conformably to such a fundamental principle then, in
accordance with a constitutional mandate, this Court has
never hesitated to assure that there be just compensation. If it
were otherwise, the element of arbitrariness certainly would
enter. It is bad enough that an owner of a property, in the
event of the exercise of this sovereign prerogative, has no
choice but to yield to such a taking. It is infinitely worse if
thereafter, he is denied all these years the payment to which
he is entitled. This is one of the instances where law and
morals speak to the same effect. (Cf. Province of Tayabas v.
Perez, 66 Phil. 467 [1938] and other related cases).
The property of the petitioner was taken by the government in 1975. The
following year, respondent NIA made the required deposit of P2,097.30 with
the Philippine National Bank and within the same year, the Barotac Viejo
Irrigation Project was finished. Since then, for more than a period of ten (10)
years, the project has been of service to the farmers nearby in the province of
Iloilo. It is, thus, inconceivable how this project could have been started
without the necessary appropriation for just compensation. Needless to state,
no government instrumentality, agency, or subdivision has any business
initiating expropriation proceedings unless it has adequate funds, supported
by proper appropriation acts, to pay for the property to be seized from the
owner. Not only was the government able to make an initial deposit of
P2,097.30 but the project was finished in only a year's time. We agree with the
petitioner that before the respondent NIA undertook the construction of the
Barotac Viejo Irrigation Project, the same was duly authorized, with the
corresponding funds appropriated for the payment of expropriated land and
to pay for equipment, salaries of personnel, and other expenses incidental to
the project. The NIA officials responsible for the project have to do plenty of
explaining as to where they misdirected the funds intended for the
expropriated property.
The present case must be distinguished from earlier cases where payment for
property expropriated by the National Government may not be realized upon
execution. As a rule, the legislature must first appropriate the additional
amount to pay the award. (See Commissioner of Public Highways v. San
Diego, 31 SCRA 616 and Visayan Refining Co. v. Camus & Paredes, 40 Phil.
550).
In the present case, the Barotac Viejo Project was a package project of
government. Money was allocated for an entire project. Before bulldozers and
ditch diggers tore up the place and before millions of pesos were put into the
development of the project, the basic responsibility of paying the owners for
property seized from them should have been met.
Another distinction lies in the fact that the NIA collects fees for the use of the
irrigation system constructed on the petitioner's land. It does not have to await
an express act of Congress to locate funds for this specific purpose. The rule in
earlier precedents that the functions and public services rendered by the state
cannot be allowed to be paralyzed or disrupted by the diversion of public
funds from their legitimate and specific objects (Commissioner of Public
Highways v. San Diego, supra, at p. 625) is not applicable here. There is no
showing of any public service to be disrupted if the fees collected from the
farmers of Iloilo for the use of irrigation water from the disrupted property
were utilized to pay for that property.
We must emphasize that nowhere in any expropriation case has there been a
deviation from the rule that the Government must pay for expropriated
property. In the Commissioner of Public Highways case, the Court stressed that
it is incumbent upon the legislature to appropriate the necessary amount
because it cannot keep the land and dishonor the judgment.
This case illustrates the expanded meaning of "public use" in the eminent
domain clause. (Constitution, Article III, Section 9.) The petitioner's land was
not taken for the construction of a road, bridge, school, public buildings, or
other traditional objects of expropriation. When the National Housing
Authority expropriates raw land to convert into housing projects for rent or
sale to private persons or the NIA expropriates land to construct irrigation
systems and sells water rights to farmers, it would be the height of abuse and
ignominy for the agencies to start earning from those properties while
ignoring final judgments ordering the payment of just compensation to the
former owners.
Just compensation means not only the correct determination of the amount to
be paid to the owner of the land but also the payment of the land within a
reasonable time from its taking. Without prompt payment, compensation
cannot be considered "just" for the property owner is made to suffer the
consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to
cope with his loss. Thus, in the case of Provincial Government of Sorsogon v. Rosa
E. Vda. de Villaroyo (153 SCRA 291), we ruled:
The petitioners have been waiting for more than thirty years
to be paid for their land which was taken for use as a public
high school. As a matter of fair procedure, it is the duty of the
Government whenever it takes property from private persons
against their will to supply all required documentation and facilitate
payment of just compensation. The imposition of unreasonable
requirements and vexatious delays before effecting payment
is not only galling and arbitrary but a rich source of discontent
with government. There should be some kind of swift and
effective recourse against unfeeling and uncaring acts of
middle or lower level bureaucrats.
 Under ordinary circumstances, immediate return to the
owners of the unpaid property is the obvious remedy. ln cases
where land is taken for public use, public interest, however,
must, be considered. The children of Gubat, Sorsogon have
been using the disputed land as their high school athletic
grounds for thirty years. (Emphasis supplied)

In the present case, the irrigation project was completed and

has been in operation since 1976. The project is benefitting the
farmers specifically and the community in general.
Obviously, the petitioner's land cannot be returned to him.
However, it is high time that the petitioner be paid what was
due him eleven years ago. It is arbitrary and capricious for a
government agency to initiate expropriation proceedings,
seize a person's property, allow the judgment of the court to
become final and executory and then refuse to pay on the
ground that there are no appropriations for the property
earlier taken and profitably used. We condemn in the
strongest possible terms the cavalier attitude of government
officials who adopt such a despotic and irresponsible stance.

WHEREFORE, the petition is hereby GRANTED. The decision and order of

the respondent appellate court dated November 25, 1987 and February 16,
1987 respectively are ANNULLED and SET ASIDE. The Regional Trial Court
of Iloilo City is ordered to immediately execute the final judgment in Civil
Case No. 10530 and effect payment of P200,000.00 as just compensation
deducting therefrom the partial payment already deposited by the respondent
at the institution of the action below with legal interest from September 21,
1985, plus P5,000.00 attorney's fees and P2,500.00 litigation expenses.

SO ORDERED.
Republic of the Philippines
Supreme Court
Manila SERENO, J.:

SECOND DIVISION

Before the Court is a Petition for Review on Certiorari under Rule 45

REPUBLIC OF THE PHILIPPINES, represented by G. R. No. 185124 of the Rules of Court, seeking the reversal of the 12 August 2008 Court of
the NATIONAL IRRIGATION Appeals (CA) Decision and 22 October 2008 Resolution in CA-G.R. CV No.
ADMINISTRATION (NIA), 65196.

Petitioner, The assailed issuances affirmed with modification the 31 August 1999
Judgment promulgated by the Regional Trial Court (RTC), Branch 22, Judicial
Present: Region, Kabacan, Cotabato. The RTC had fixed the just compensation for the
value of the land and improvements thereon that were expropriated by
- versus - petitioner, but excluded the value of the excavated soil. Petitioner Republic of
CARPIO, J., Chairperson,
PEREZ, the Philippines is represented in this case by the National Irrigation Authority
SERENO, (NIA).
REYES, and
RURAL BANK OF KABACAN, INC., LITTIE PERLAS-BERNABE, JJ.The Facts
SARAH A. AGDEPPA, LEOSA NANETTE
AGDEPPA and MARCELINO VIERNES, Promulgated: NIA is a government-owned-and-controlled corporation created
MARGARITA TABOADA, PORTIA CHARISMA under Republic Act No. (R.A.) 3601 on 22 June 1963. It is primarily responsible
RUTH ORTIZ, represented by LINA ERLINDA A. January 25, 2012 for irrigation development and management in the country. Its charter was
ORTIZ and MARIO ORTIZ, JUAN MAMAC and amended by Presidential Decree (P.D.) 552 on 11 September 1974 and P.D.
GLORIA MATAS, 1702 on 17 July 1980. To carry out its purpose, NIA was specifically authorized
under P.D. 552 to exercise the power of eminent domain.43[1]
Respondents.
NIA needed some parcels of land for the purpose of constructing the
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x Malitubog-Marigadao Irrigation Project. On 08 September 1994, it filed with
the RTC of Kabacan, Cotabato a Complaint for the expropriation of a portion
of three (3) parcels of land covering a total of 14,497.91 square meters.44[2] The

DECISION
case was docketed as Special Civil Case No. 61 and was assigned to RTC-
Branch 22. The affected parcels of land were the following:
1) Lot No. 3080 covered by Transfer Certificate of Title (TCT)
No. T-61963 and registered under the Rural Bank of
Kabacan
negotiated with the landowners before taking their properties for the project,
causing permanent and irreparable damages to their properties valued at
250,000.49[7]
On 11 September 1996, the RTC issued an Order forming a committee
tasked to determine the fair market value of the expropriated

2) Lot No. 455 covered by TCT No. T-74516 and registered

under the names of RG May, Ronald and Rolando, all
surnamed Lao

3) Lot No. 3039 registered under the name of Littie Sarah

Agdeppa45[3]

On 11 July 1995, NIA filed an Amended Complaint to include Leosa

Nanette A. Agdeppa and Marcelino Viernes as registered owners of Lot No.
3039.46[4]

On 25 September 1995, NIA filed a Second Amended Complaint to

allege properly the area sought to be expropriated, the exact address of the
expropriated properties and the owners thereof. NIA further prayed that it be
authorized to take immediate possession of the properties after depositing
with the Philippine National Bank the amount of 19,246.58 representing the
provisional value thereof.47[5]

On 31 October 1995, respondents filed their Answer with Affirmative

and Special Defenses and Counterclaim.48[6] They alleged, inter alia, that NIA
had no authority to expropriate portions of their land, because it was not a
sovereign political entity; that it was not necessary to expropriate their
properties, because there was an abandoned government property adjacent to
theirs, where the project could pass through; that Lot No. 3080 was no longer
owned by the Rural Bank of Kabacan; that NIAs valuation of their
expropriated properties was inaccurate because of the improvements on the
land that should have placed its value at 5 million; and that NIA never
properties to establish the just compensation to be paid to the owners. The
committee was composed of the Clerk of Court of RTC Branch 22 as
chairperson and two (2) members of the parties to the case.50[8]
On 20 September 1996, in response to the expropriation Complaint,
respondents-intervenors Margarita Tabaoda, Portia Charisma Ruth Ortiz,
Lina Erlinda Ortiz, Mario Ortiz, Juan Mamac and Gloria Matas filed their
Answer-in-Intervention with Affirmative and Special Defenses and Counter-
Claim. They essentially adopted the allegations in the Answer of the other
respondents and pointed out that Margarita Tabaoda and Portia Charisma
Ruth Ortiz were the new owners of Lot No. 3080, which the two acquired from
the Rural Bank of Kabacan. They further alleged that the four other
respondents-intervenors were joint tenants-cultivators of Lot Nos. 3080 and
3039.51[9]
On 10 October 1996, the lower court issued an Order stating it would
issue a writ of possession in favor of NIA upon the determination of the fair
market value of the properties, subject of the expropriation proceedings.52[10]
The lower court later amended its ruling and, on 21 October 1996, issued a
Writ of Possession in favor of NIA.53[11]
On 15 October 1996, the committee submitted a Commissioners
Report54[12] to the RTC stating the following observations:
In the process of ocular inspection, the following
were jointly observed:
1) The area that was already occupied is 6x200 meters
which is equivalent to 1,200 square meters;
2) The area which is to be occupied is 18,930 square meters,
more or less;
3) That the area to be occupied is fully planted by gmelina
trees with a spacing of 1x1 meters;
4) That the gmelina tress found in the area already
occupied and used for [the] road is planted with gmelina
with spacing of 2x2 and more or less one (1) year old;
5) That the gmelina trees found in the area to be occupied
are already four (4) years old;
6) That the number of banana clumps (is) two hundred
twenty (220);
7) That the number of coco trees found (is) fifteen
(15).55[13]
The report, however, stated that the committee members could not
agree on the market value of the subject properties and recommended the
appointment of new independent commissioners to replace the ones coming
from the parties only. 56 [14] On 22 October 1996, the RTC issued an
Order57[15] revoking the appointments of Atty. Agdeppa and Engr. Mabang
as members of the committee and, in their stead, appointed Renato
Sambrano, Assistant Provincial Assessor of the Province of Cotabato; and
Jack Tumacmol, Division Chief of the Land Bank of the
PhilippinesKidapawan Branch.58[16]
On 25 November 1996, the new committee submitted its
Commissioners Report to the lower court. The committee had agreed that the
fair market value of the land to be expropriated should be 65 per square
meter based on the zonal valuation of the Bureau of Internal Revenue (BIR).
 As regards the improvement on the properties, the report recommended the
following compensation:
a. 200 for each gmelina tree that are more than four (4) years
old
b. 150 for each gmelina tree that are more than one (1) year old
c. 164 for each coco tree
d. 270 for each banana clump59[17]
On 03 December 1997, the committee submitted to the RTC another
report, which had adopted the first Committee Report, as well as the formers
25 November 1996 report. However, the committee added to its computation
the value of the earthfill excavated from portions of Lot Nos. 3039 and
3080.60[18] Petitioner objected to the inclusion of the value of the excavated
soil in the computation of the value of the land.61[19]
The Ruling of the Trial Court
On 31 August 1999, the RTC promulgated its Judgment,62[20] the
dispositive portion of which reads:
WHEREFORE, IN VIEW of all the foregoing
considerations, the court finds and so holds that the
commissioners have arrived at and were able to determine the
fair market value of the properties. The court adopts their
findings, and orders:
1. That 18,930 square meters of the lands owned by
the defendants is hereby expropriated in favor of
the Republic of the Philippines through the
National Irrigation Administration;
2. That the NIA shall pay to the defendants the
amount of 1,230,450 for the 18,930 square meters
expropriated in proportion to the areas so
expropriated;
3. That the NIA shall pay to the defendant-
intervenors, owners of Lot No. 3080, the sum of
5,128,375.50, representing removed earthfill;
4. That the NIA shall pay to the defendants,
owners of Lot No. 3039, the sum of P1,929,611.30
representing earthfill;
5. To pay to the defendants the sum of 60,000 for
the destroyed G-melina trees (1 year old);
6. To pay to the defendants the sum of
3,786,000.00 for the 4-year old G-melina trees;
7. That NIA shall pay to the defendants the sum of
2,460.00 for the coconut trees;
8. That all payments intended for the defendant
Rural Bank of Kabacan shall be given to the
defendants and intervenors who have already
acquired ownership over the land titled in the
name of the Bank.63[21]
NIA, through the Office of the Solicitor General (OSG), appealed the
Decision of the RTC to the CA, which docketed the case as CA-G.R. CV No.
65196. NIA assailed the trial courts adoption of the Commissioners Report,
which had determined the just compensation to be awarded to the owners of
the lands expropriated. NIA also impugned as error the RTCs inclusion for
compensation of the excavated soil from the expropriated properties. Finally,
it disputed the trial courts Order to deliver the payment intended for the Rural
Bank of Kabacan to defendants-intervenors, who allegedly acquired
ownership of the land still titled in the name of the said rural bank.64[22]
The Ruling of the Court of Appeals
On 12 August 2008, the CA through its Twenty-First (21st) Division,
promulgated a Decision65[23] affirming with modification the RTC Decision.
It ruled that the committee tasked to determine the fair market value of the
properties and improvements for the purpose of arriving at the just
compensation, properly performed its function. The appellate court noted that
the committee members had conducted ocular inspections of the area
surrounding the expropriated properties and made their recommendations
based on official documents from the BIR with regard to the zonal valuations
of the affected properties.66[24] The CA observed that, as far as the valuation
of the improvements on the properties was concerned, the committee
members took into consideration the provincial assessors appraisal of the age
of the trees, their productivity and the inputs made.67[25] The appellate court
further noted that despite the Manifestation of NIA that it be allowed to
present evidence to rebut the recommendation of the committee on the
valuations of the expropriated properties, NIA failed to do so.68[26]
The assailed CA Decision, however, deleted the inclusion of the value
of the soil excavated from the properties in the just compensation. It ruled that
the property owner was entitled to compensation only for the value of the
property at the time of the taking. 69 [27] In the construction of irrigation
projects, excavations are necessary to build the canals, and the excavated soil
cannot be valued separately from the land expropriated. Thus, it concluded
that NIA, as the new owner of the affected properties, had the right to enjoy
and make use of the property, including the excavated soil, pursuant to the
latters objectives.70[28]
Finally, the CA affirmed the trial courts ruling that recognized
defendants-intervenors Margarita Tabaoda and Portia Charisma Ruth Ortiz as
the new owners of Lot No. 3080 and held that they were thus entitled to just
compensation. The appellate court based its conclusion on the non-
participation by the Rural Bank of Kabacan in the expropriation proceedings
and the latters Manifestation that it no longer owned Lot No. 3080.71[29]
On 11 September 2008, the NIA through the OSG filed a Motion for
Reconsideration of the 12 August 2008 Decision, but that motion was
denied.72[30]
Aggrieved by the appellate courts Decision, NIA now comes to this
Court via a Petition for Review on Certiorari under Rule 45.
The Issues
The following are the issues proffered by petitioner:
THE COURT OF APPEALS SERIOUSLY ERRED IN
AFFIRMING THE TRIAL COURTS FINDING OF JUST
COMPENSATION OF THE LAND AND THE
IMPROVEMENTS THEREON BASED ON THE REPORT OF
THE COMMISSIONERS.
 THE COURT OF APPEALS ERRED IN RULING THAT THE
PAYMENT OF JUST COMPENSATION FOR LOT NO. 3080
SHOULD BE MADE TO RESPONDENTS MARGARITA
TABOADA AND PORTIA CHARISMA RUTH ORTIZ.73[31]
The Courts Ruling
On the first issue, the Petition is not meritorious.
In expropriation proceedings, just compensation is defined as the full
and fair equivalent of the property taken from its owner by the expropriator.
The measure is not the taker's gain, but the owner's loss. The word just is used
to intensify the meaning of the word compensation and to convey thereby the
idea that the equivalent to be rendered for the property to be taken shall be
real, substantial, full and ample.74[32] The constitutional limitation of just
compensation is considered to be a sum equivalent to the market value of the
property, broadly defined as the price fixed by the seller in open market in the
usual and ordinary course of legal action and competition; or the fair value of
the property; as between one who receives and one who desires to sell it, fixed
at the time of the actual taking by the government.75[33]
In the instant case, we affirm the appellate courts ruling that the
commissioners properly determined the just compensation to be awarded to
the landowners whose properties were expropriated by petitioner.
The records show that the trial court dutifully followed the procedure
under Rule 67 of the 1997 Rules of Civil Procedure when it formed a committee
that was tasked to determine the just compensation for the expropriated
properties. The first set of committee members made an ocular inspection of
the properties, subject of the expropriation. They also determined the exact
areas affected, as well as the kinds and the number of improvements on the
properties.76[34] When the members were unable to agree on the valuation of
the land and the improvements thereon, the trial court selected another batch
of disinterested members to carry out the task of determining the value of the
land and the improvements.
The new committee members even made a second ocular inspection
of the expropriated areas. They also obtained data from the BIR to determine
the zonal valuation of the expropriated properties, interviewed the adjacent
property owners, and considered other factors such as distance from the
highway and the nearby town center.77[35] Further, the committee members
also considered Provincial Ordinance No. 173, which was promulgated by the
Province of Cotabato on 15 June 1999, and which provide for the value of the
properties and the improvements for taxation purposes.78[36]
We can readily deduce from these established facts that the committee
members endeavored a rigorous process to determine the just compensation
to be awarded to the owners of the expropriated properties. We cannot, as
petitioner would want us to, oversimplify the process undertaken by the
committee in arriving at its recommendations, because these were not based
on mere conjectures and unreliable data.
In National Power Corporation v. Diato-Bernal, 79 [37] this Court
emphasized that the just-ness of the compensation could only be attained by
using reliable and actual data as bases for fixing the value of the condemned
property. The reliable and actual data we referred to in that case were the
sworn declarations of realtors in the area, as well as tax declarations and zonal
valuation from the BIR. In disregarding the Committee Report assailed by the
National Power Corporation in the said case, we ruled thus:
It is evident that the above conclusions are highly
speculative and devoid of any actual and reliable basis. First, the
market values of the subject propertys neighboring lots were
mere estimates and unsupported by any corroborative
documents, such as sworn declarations of realtors in the area
 concerned, tax declarations or zonal valuation from the Bureau of
Internal Revenue for the contiguous residential dwellings and
commercial establishments. The report also failed to elaborate on
how and by how much the community centers and convenience
facilities enhanced the value of respondents property. Finally, the
market sales data and price listings alluded to in the report were
not even appended thereto.
As correctly invoked by NAPOCOR, a commissioners
report of land prices which is not based on any documentary
evidence is manifestly hearsay and should be disregarded by the
court.
The trial court adopted the flawed findings of the
commissioners hook, line, and sinker. It did not even bother to
require the submission of the alleged market sales data and price
listings. Further, the RTC overlooked the fact that the
recommended just compensation was gauged as of September 10,
1999 or more than two years after the complaint was filed on
January 8, 1997. It is settled that just compensation is to be
ascertained as of the time of the taking, which usually coincides
with the commencement of the expropriation proceedings. Where
the institution of the action precedes entry into the property, the
just compensation is to be ascertained as of the time of the filing
of the complaint. Clearly, the recommended just compensation in
the commissioners report is unacceptable.80[38]
In the instant case, the committee members based their
recommendations on reliable data and, as aptly noted by the appellate court,
considered various factors that affected the value of the land and the
improvements.81[39]
Petitioner, however, strongly objects to the CAs affirmation of the trial
courts adoption of Provincial Ordinance No. 173. The OSG, on behalf of
petitioner, strongly argues that the recommendations of the committee formed
by the trial court were inaccurate. The OSG contends that the ordinance
reflects the 1999 market values of real properties in the Province of Cotabato,
while the actual taking was made in 1996.82[40]
We are not persuaded.
We note that petitioner had ample opportunity to rebut the testimonial,
as well as documentary evidence presented by respondents when the case was
still on trial. It failed to do so, however. The issue raised by petitioner was
adequately addresses by the CAs assailed Decision in this wise:
A thorough scrutiny of the records reveals that the second
set of Commissioners, with Atty. Marasigan still being the
Chairperson and Mr. Zambrano and Mr. Tomacmol as
members, was not arbitrary and capricious in performing the
task assigned to them. We note that these Commissioners
were competent and disinterested persons who were
handpicked by the court a quo due to their expertise in
appraising the value of the land and the improvements
thereon in the province of Cotabato. They made a careful
study of the area affected by the expropriation, mindful of the
fact that the value of the land and its may be affected by many
factors. The duly appointed Commissioners made a second
ocular inspection of the subject area on 4 September 1997;
went to the BIR office in order to get the BIR zonal valuation
of the properties located in Carmen, Cotabato; interviewed
adjacent property owners; and took into consideration
various factors such as the location of the land which is just
less than a kilometer away from the Poblacion and half a
kilometer away from the highway and the fact that it is near
a military reservation. With regard to the improvements, the
Commissioners took into consideration the valuation of the
 Provincial Assessor, the age of the trees, and the inputs and
their productivity.
Thus, it could not be said that the schedule of market
values in Ordinance No. 173 was the sole basis of the
Commissioners in arriving at their valuation. Said ordinance
merely gave credence to their valuation which is comparable
to the current price at that time. Besides, Mr. Zambrano
testified that the date used as bases for Ordinance No. 173
were taken from 1995 to 1996.83[41]
Moreover, factual findings of the CA are generally binding on this
Court. The rule admits of exceptions, though, such as when the factual
findings of the appellate court and the trial court are contradictory, or when
the findings are not supported by the evidence on record. 84 [42] These
exceptions, however, are not present in the instant case.
Thus, in the absence of contrary evidence, we affirm the findings of the
CA, which sustained the trial courts Decision adopting the committees
recommendations on the just compensation to be awarded to herein
respondents.
We also uphold the CA ruling, which deleted the inclusion of the
value of the excavated soil in the payment for just compensation. There is no
legal basis to separate the value of the excavated soil from that of the
expropriated properties, contrary to what the trial court did. In the context of
expropriation proceedings, the soil has no value separate from that of the
expropriated land. Just compensation ordinarily refers to the value of the land
to compensate for what the owner actually loses. Such value could only be that
which prevailed at the time of the taking.
In National Power Corporation v. Ibrahim, et al.,85[43] we held that rights
over lands are indivisible, viz:
[C]onsequently, the CAs findings which upheld those of the
trial court that respondents owned and possessed the
property and that its substrata was possessed by petitioner
since 1978 for the underground tunnels, cannot be disturbed.
Moreover, the Court sustains the finding of the lower courts
that the sub-terrain portion of the property similarly belongs
to respondents. This conclusion is drawn from Article 437 of
the Civil Code which provides:
ART. 437. The owner of a parcel of land is the
owner of its surface and of everything under it, and
he can construct thereon any works or make any
plantations and excavations which he may deem
proper, without detriment to servitudes and subject
to special laws and ordinances. He cannot complain
of the reasonable requirements of aerial navigation.
Thus, the ownership of land extends to the surface as well
as to the subsoil under it.
xxx xxx
xxx
Registered landowners may even be ousted of ownership and
possession of their properties in the event the latter are
reclassified as mineral lands because real properties are
characteristically indivisible. For the loss sustained by such
owners, they are entitled to just compensation under the
Mining Laws or in appropriate expropriation proceedings.
Moreover, petitioners argument that the landowners right
extends to the sub-soil insofar as necessary for their practical
interests serves only to further weaken its case. The theory
would limit the right to the sub-soil upon the economic utility
which such area offers to the surface owners. Presumably, the
landowners right extends to such height or depth where it is
possible for them to obtain some benefit or enjoyment, and it
is extinguished beyond such limit as there would be no more
interest protected by law.
Hence, the CA correctly modified the trial courts Decision when it
ruled thus:
We agree with the OSG that NIA, in the construction
of irrigation projects, must necessarily make excavations in
order to build the canals. Indeed it is preposterous that NIA
will be made to pay not only for the value of the land but also
for the soil excavated from such land when such excavation is
a necessary phase in the building of irrigation projects. That
NIA will make use of the excavated soil is of no moment and
is of no concern to the landowner who has been paid the fair
market value of his land. As pointed out by the OSG, the law
does not limit the use of the expropriated land to the surface
area only. Further, NIA, now being the owner of the
expropriated property, has the right to enjoy and make use of
the property in accordance with its mandate and objectives as
provided by law. To sanction the payment of the excavated
soil is to allow the landowners to recover more than the value
of the land at the time when it was taken, which is the true
measure of the damages, or just compensation, and would
discourage the construction of important public
improvements.86[44]
On the second issue, the Petition is meritorious.
The CA affirmed the ruling of the trial court, which had awarded the
payment of just compensation intended for Lot No. 3080 registered in the
name of the Rural Bank of Kabacan to the defendants-intervenors on the basis
of the non-participation of the rural bank in the proceedings and the latters
subsequent Manifestation that it was no longer the owner of that lot. The
appellate court erred on this matter.
It should be noted that eminent domain cases involve the expenditure
of public funds.87[45] In this kind of proceeding, we require trial courts to be
more circumspect in their evaluation of the just compensation to be awarded
to the owner of the expropriated property.88[46] Thus, it was imprudent for property, or retain it for the public use or purpose if entry has
the appellate court to rely on the Rural Bank of Kabacans mere declaration of already been made.
non-ownership and non-participation in the expropriation proceeding to
validate defendants-intervenors claim of entitlement to that payment.
Hence, the appellate court erred in affirming the trial courts Order to
award payment of just compensation to the defendants-intervenors. There is
The law imposes certain legal requirements in order for a conveyance
doubt as to the real owner of Lot No. 3080. Despite the fact that the lot was
of real property to be valid. It should be noted that Lot No. 3080 is a registered
covered by TCT No. T-61963 and was registered under its name, the Rural
parcel of land covered by TCT No. T-61963. In order for the reconveyance of
Bank of Kabacan manifested that the owner of the lot was no longer the bank,
real property to be valid, the conveyance must be embodied in a public
but the defendants-intervenors; however, it presented no proof as to the
document89[47] and registered in the office of the Register of Deeds where the
conveyance thereof. In this regard, we deem it proper to remand this case to
property is situated.90[48]
the trial court for the reception of evidence to establish the present owner of
We have scrupulously examined the records of the case and found no Lot No. 3080 who will be entitled to receive the payment of just compensation.
proof of conveyance or evidence of transfer of ownership of Lot No. 3080 from
WHEREFORE, the Petition is PARTLY GRANTED. The 12 August
its registered owner, the Rural Bank of Kabacan, to defendants-intervenors.
2008 CA Decision in CA-G.R. CV No. 65196, awarding just compensation to
As it is, the TCT is still registered in the name of the said rural bank. It is not
the defendants as owners of the expropriated properties and deleting the
disputed that the bank did not participate in the expropriation proceedings,
inclusion of the value of the excavated soil, is hereby AFFIRMED with
and that it manifested that it no longer owned Lot No. 3080. The trial court
MODIFICATION. The case is hereby REMANDED to the trial court for the
should have nevertheless required the rural bank and the defendants-
reception of evidence to establish the present owner of Lot No. 3080. No
intervenors to show proof or evidence pertaining to the conveyance of the
pronouncements as to cost.
subject lot. The court cannot rely on mere inference, considering that the
payment of just compensation is intended to be awarded solely owner based
on the latters proof of ownership.
SO ORDERED.
The trial court should have been guided by Rule 67, Section 9 of the
1997 Rules of Court, which provides thus:

SEC. 9. Uncertain ownership; conflicting claims. If the

ownership of the property taken is uncertain, or there are
conflicting claims to any part thereof, the court may order any
sum or sums awarded as compensation for the property to be
paid to the court for the benefit of the person adjudged in the
same proceeding to be entitled thereto. But the judgment shall
require the payment of the sum or sums awarded to either the
defendant or the court before the plaintiff can enter upon the
SPECIAL SECOND DIVISION
G.R. No. 173226, July 29, 2013
LAND BANK OF THE PHILIPPINES, Petitioner, v. MANUEL O. GALLEGO,
JR., JOSEPH L. GALLEGO AND CHRISTOPHER L. GALLEGO,
Respondents.
RESOLUTION
BRION, J.:
We rule on the amount of just compensation due respondents Manuel O.
Gallego, Jr., Joseph L. Gallego, and Christopher L. Gallego for the 120-hectare
portion, more or less, of their property situated in Barangays Sta. Rita and
Concepcion, Cabiao, Nueva Ecija, placed under the governments land reform
program under Presidential Decree No. 27 and Republic Act (R.A.) No. 6657
(the Comprehensive Agrarian Reform Law of 1988).
On August 10, 2006, petitioner Land Bank of the Philippines (LBP) filed a Rule
45 petition for review on certiorari1 challenging the September 29, 2005
Decision2 and the June 23, 2006 Resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 77676. In its September 29, 2005 decision, the CA affirmed
with modification the March 14, 2003 Decision4 of the Regional Trial Court,
Third Judicial Region, Branch 29, Cabanatuan City, acting as a Special
Agrarian Court (RTC-SAC), in Agr. Case No. 127. The CA reduced the amount
of just compensation that the RTC-SAC fixed at P52,209,720.00 to
P30,711,600.00.
The Factual Antecedents
We restate the facts of the case, as found by this Court in its January 20, 2009
Decision,5 as follows:cralawlibrary
Respondents Manuel O. Gallego, Jr., Joseph L. Gallego and Christopher L.
Gallego are the co-owners of several parcels of agricultural lands located in
Barangay Sta. Rita and Barangay Concepcion in Cabiao, Nueva Ecija. The
lands have an aggregate area of 142.3263 hectares and are covered by Transfer
Certificate of Title Nos. T-139629, T-139631 and T-139633.
Sometime in 1972, the DAR placed a portion of the property under the
coverage of Presidential Decree No. 27 (P.D. No. 27). However, the DAR and
respondents failed to agree on the amount of just compensation, prompting
respondents to file on 10 December 1998 a petition before the RTC of
Cabanatuan City. The petition, docketed as Agrarian Case No. 127-AF, named
the DAR and herein petitioner Land Bank of the Philippines (LBP) as
respondents and prayed that just compensation be fixed in accordance with
the valuation formula under P.D. No. 27 based on an Average Gross
Production of 109.535 cavans per hectare including interest at 6%
compounded annually as provided under PARC Resolution No. 92-24-1.
Petitioner LBP filed an answer, averring that only 76.8324 hectares and not
89.5259 hectares as was alleged in the petition were placed under the coverage
of P.D. No. 27 and that just compensation should be determined based on an
Average Gross Production of 65 cavans and/or 56.6 cavans per hectare which
were the values at the time of taking of the property. Although the DAR did
not file an answer, it was represented at the hearings by a certain Atty.
Benjamin T. Bagui.
During the course of the hearing of the petition, the coverage of respondents
lands had expanded to a bigger area. In order to conform to the increase in the
area placed under agrarian reform, respondents filed on 14 October 2002 an
amended petition, stating that as certified by the Municipal Agrarian Reform
Office (MARO) of Cabiao, Nueva Ecija, 122.8464 hectares of the property had
already been placed under the operation of P.D. No. 27. In the answer filed by
the DAR as well as during pre-trial, the counsels for DAR and petitioner LBP
stipulated that the property subject of the petition was irrigated and had a total
area of 120 hectares, more or less.
After the pre-trial conference, the trial court issued an Order dated 08
November 2002, embodying the agreed stipulation that the property placed
under agrarian reform had an area of 120 hectares, more or less x x x. In a
Supplemental Pre-Trial Order dated 25 November 2002, the trial court stated
that in view of the parties agreement that the property was irrigated and had Petitioner LBP sought reconsideration but was denied in a Resolution dated
an area of 120 hectares, the only factual issue to be resolved would be the 23 June 2006. Hence, the instant petition[.]6 (citation omitted)
correct Average Gross Production x x x on which just compensation would be
fixed. In a decision dated January 20, 2009, we denied the petition, reversed and set
aside the September 29, 2005 and the June 23, 2006 rulings of the CA, and
On 14 March 2003, the trial court rendered a Decision, adopting respondents remanded the case to the CA for further reception of evidence and for the
formula which was based on an Average Gross Production of 121.6 cavans per determination of the amount of just compensation under the terms of Section
hectare. x x x 17 of R.A. No. 6657 and Department of Agrarian Reform Administrative Order
(DAR A.O.) No. 05-98, as amended.
x x x x
On February 18, 2009, the LBP filed an urgent omnibus motion (for partial
Both petitioner LBP and the DAR separately moved for the reconsideration of reconsideration of the January 20, 2009 decision and for referral of the instant
the trial courts Decision. In its Order dated 28 April 2003, the trial court case to the Court sitting en banc).7 In its April 29, 2009 resolution, the Court
denied both motions. denied the LBPs motion. The CA submitted its Report8 on April 30, 2009.

Only petitioner LBP appealed from the trial courts Decision. According to The CAs Report
petitioner LBP, the trial court erred in applying values that had no basis in law
instead of adopting the Average Gross Production established by the In the April 30, 2009 Report,9 the CA recommended two alternative solutions
Barangay Committee on Land Production under DAR Circular No. 26, series for computing the disputed just compensation. In the first alternative, the CA
of 1973, and the mandated Government Support Price of P35 per cavan of recommended the use of the alternate formula LV=(CS x 0.9) + (MV x 0.1)
palay under Section 2 of Executive Order (E.O.) No. 228. as proposed by the respondents, for a just compensation of Ninety-Five
Million, Three Hundred Fifty Thousand, Forty-Nine Pesos and 27/100
Upon motion by respondents, the Court of Appeals issued a Resolution on 5 (P95,350,049.27). In the second alternative, the CA recommended the use of
November 2004, ordering the release of P2,000,000.00 in favor of respondents the basic formula LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) as provided
as partial execution of the Decision of the trial court. The appellate court under Item II.A. of DAR A.O. No. 05-98, for a just compensation of Fifty
allowed the partial execution on the grounds that respondent Manuel Gallego Million, Four Hundred Thirty-One Thousand, Five Hundred Six Pesos
was in need of an urgent medical operation and that there was no longer any (P50,431,506.00).
question that respondents were entitled to just compensation.
First alternative recommended by
The Court of Appeals rendered the assailed Decision on 29 September 2005. the CA for computing just
The appellate court agreed that the values applied by the trial court in fixing compensation
just compensation had no legal basis because the formula under P.D. No. 27
and E.O. No. 228 mandated a Government Support Price of P35.00 per cavan In determining the amount of just compensation, both parties agreed that
of palay. x x x reference should be made to DAR A.O. No. 05-98. The formula for computing
just compensation, as outlined in Item II.A. of DAR A.O. No. 05-98,
x x x x reads:cralawlibrary
A. There shall be one basic formula for the valuation of lands covered by VOS A. The LBPs computation
or CA:cralawlibrary
The LBP claimed that the amount of just compensation should be fixed at
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) Twenty Four Million, Six Hundred Sixty-Five Thousand, Seven Hundred
Where: LV = Land Value Forty-Nine Pesos and 99/100 (P24,665,749.99) using the alternate formula LV
CNI = Capitalized Net Income = (CNI x 0.9) + (MV x 0.1),10 as provided under Item II.A.1 of DAR A.O. No.
CS = Comparable Sales 05-98. The LBP insisted that the Appraisal Report11 presented by the
MV = Market Value per Tax Declaration respondents, as basis for computing the CS factor, should not be used,
following Items II.C.2.b and II.C.2.c of DAR A.O. No. 05-98.12 Item II.C.2.b
The above formula shall be used if all the three factors are present, relevant, requires that the expropriated property, as well as the property subject of the
and applicable. comparable sales transactions, should be similar in topography and land use,
while Item II.C.2.c provides that the comparable sales transactions should
When, however, the factors of Capitalized Net Income (CNI), Comparable have been executed within the period of January 1, 1985 to June 15, 1988 and
Sales (CS) or Market Value per Tax Declaration (MV) are not all present, registered within the period of January 1, 1985 to September 13, 1988. The LBP
relevant and applicable, Item II.A. of DAR A.O. No. 05-98 provides for three claimed that the property subject of the comparable sales transactions (some
alternate formulae:cralawlibrary were residential subdivision lots)13 and the respondents property (which is
agricultural) are not devoted to identical purposes and the data used in the
A.1 When the CS factor is not present and CNI and MV are applicable, the Appraisal Report were not registered and were executed beyond the allowable
formula shall be: period. Considering the absence of CS, the LBP applied the alternate formula
LV = (CNI x 0.9) + (MV x 0.1).
LV = (CNI x 0.9) + (MV x 0.1)
In arriving at the amount of P24,665,749.99, the LBP separately computed the
A.2 When the CNI factor is not present, and CS and MV are applicable, the CNI and the MV and then added the figures arrived at for each factor. The
formula shall be:cralawlibrary LBP used the following formula (as provided under Item II.B, DAR A.O. No.
05-98) and data in computing for the CNI:14cralaw virtualaw library
LV = (CS x 0.9) + (MV x 0.1)
CNI = AGP x SP x NIR
A.3 When both the CS and CNI are not present and only MV is applicable, the 0.12
formula shall be:cralawlibrary
Where: AGP = Annual Gross Production
LV = MV x 2
SP = Selling Price
Since DAR A.O. No. 05-98 provides for alternate formulae depending on the NIR = Net Income Rate
presence, relevance and applicability of the indicated factors, the LBP and the
respondents arrived at significantly divergent amounts for land value when AGP = 9,000 kg/ha based on the AGP of irrigated lands in Brgy. San Fernando
the presence, relevance and applicability of the indicated factors were Sur for the years 2005 and 2006 as certified to by the Municipal Agriculturist
differently appreciated. of Cabiao, Nueva Ecija15cralaw virtualaw library
SP = 15.54 /kg based on the selling price of palay for the year 2008 as shown = P227,994.55/ha x 108.1857
on the Farm Prices Survey Provincial Summary16cralaw virtualaw library
TLV = P24,665,749.9921
NIR = 20% as fixed by DAR A.O. No. 5
B. The respondents computation
Thus: CNI = 9,000 x 15.54/kg x 0.20
0.12 The respondents, on the other hand, claimed that the amount of just
compensation should be fixed at Ninety-Five Million, Three Hundred Fifty
CNI = P233,100.00/ha or P23.31/sqm17 Thousand, Forty-Nine Pesos and 27/100 (P95,350,049.27) using the alternate
formula LV = (CS x 0.9) + (MV x 0.1) 22 per Item II.A.2, DAR A.O. No. 05-98.
In computing for the MV, the LBP used the following formula (per DAR
A.O. No. 05-98) and data:18cralaw virtualaw library The respondents took exception to the LBPs use of the factor CNI in
computing the amount of just compensation; they argued that the LBP used
MV = UMV x LAF x RCPI flawed data. The respondents pointed out that the data used by the LBP for
AGP pertained to: (1) a barangay different from where the subject property
Where: UMV = Unit Market Value was located, although these barangays belonged to the same municipality; and
(2) a year different from the data that the LBP used for selling price (SP).
LAF = Location Adjustment Factor
Considering the absence of CNI, the respondents applied the alternate
RCPI = Regional Consumer Price Index
formula LV = (CS x 0.9) + (MV x 0.1).

UMV = P200,050.00/ha for first class irrigated rice lands based on the schedule
In arriving at the amount of P95,350,049.27, the respondents presented in
of unit market values of different agricultural lands for the year 2006 from the
evidence the Appraisal Report23 to compute for the CS which showed that
Provincial Assessor of Nueva Ecija19cralaw virtualaw library
different portions of the property command different selling prices,
depending on the location and use. For the MV, the respondents submitted
LAF = 91% as fixed by DAR A.O. No. 5
the 2006 Tax Declaration24 and computed for its value by dividing the stated
adjusted market value by the land area. The respondents computed the land
RCPI = 1.0 as fixed by DAR A.O. No. 5
value (LV) as follows:25cralaw virtualaw library

Thus: MV = P200,050.00/ha x 0.91 x 1.0

1. Lot A = consists of 60.7331 hectares and commands a selling
MV = P182,045.50/ha cralaw virtualaw library
20
price of P100.00/sqm

Finally, the LBP computed the total land value as follows:cralawlibrary

LV = (P100.00/sqm x 0.9) + (15.95/sqm x 0.1)

LV = (CNI x 0.90) + (MV x 0.10)

= P90.00/sqm + P1.595/sqm
= (P233,100.00/ha x 0.90) + (P182,045.50/ha x 0.10)
= P91.595/sqm x 607,331 sqm
= P227,994.55/ha

LV = P55,628,482.94
TLV = LV x total area subjected to CARP
 2. Lot B = consists of 49.4807 hectares and commands a selling in its computation of just compensation, although the parties had already
price of P75.00/sqm agreed before the RTC-SAC that the total area acquired by the government
was 122.8464 hectares, more or less.
LV = (P75.00/sqm x 0.9) + (15.95/sqm x 0.1)
Third, the amount proposed by the LBP was unreasonably low inasmuch as
= P67.50/sqm + P1.595/sqm the respondents had not been paid, up to this date, the amount due them as
= P69.095/sqm x 494,807 sqm just compensation for their property. In addition, several infrastructural
developments had been made in the area and certain portions of the property
LV = P34,188,689.66 had already been devoted to more lucrative purposes other than agriculture.

3. Lot C = consists of 11.8744 hectares and commands a selling Finally, the amount proposed by the LBP ran contrary to the January 20, 2009
price of P50.00/sqm Decision of this Court which declared that the amount to which the
respondents are entitled as just compensation should not be lower than
LV = (P50.00/sqm x 0.9) + (15.95/sqm x 0.1) P30,711,600.00 (the amount which the CA awarded in its earlier Decision).

= P45.00/sqm + 1.595/sqm Second alternative recommended by the

= P46.595 x 118,744 sqm CA for computing just compensation

LV = P5,532,876.68 In arriving at the amount of P50,431,506.00 using the basic formula LV = (CNI
x 0.6) + (CS x 0.3) + (MV x 0.1), the CA sustained both the LBPs computation
of the CNI (P23.31) and the respondents computation of the CS (P100, P75 and
Adding all three figures, the respondents arrived at the following total land P50).28 For the MV, the CA used the market value reflected on the latest
value:cralawlibrary available Tax Declaration. Applying these figures to the formula, the CA
computed the just compensation as follows:29cralaw virtualaw library
TLV = P55,628,482.94 + P34,188,689.66
+ P5,532,876.68 Lot A = consists of 60.7331 hectares and commands a selling price of
= P95,350,049.2726 P100.00/sqm

Confronted with these two conflicting computations, the CA was inclined to LV = (P23.31 x 0.6) + (P100 x 0.3) + (P15.95 x 0.1)
consider the respondents computation which used the alternate formula LV = P13.986 + P30.00 + P1.820
= (CS x 0.9) + (MV x 0.1).27 The CA gave the following reasons:cralawlibrary = P 45.806 x 607,331 sqm
LV = P27,682,754.00
First, as the respondents pointed out, the available data for computing the CNI
was irrelevant and inapplicable as not only did the data used for computing Lot B = consists of 49.4807 hectares and commands a selling price of
the AGP pertain to a different barangay; it also referred to a year different from P75.00/sqm
the data used for computing the SP.
LV = (P23.31 x 0.6) + (P75 x 0.3) + (P15.95 x 0.1)
Second, the LBP included only 108.1857 hectares of the respondents property
= P13.986 + P22.5 + P1.820
= P 38.306 x 494,807 sqm
LV = P18,842,745.00
Lot C = consists of 11.8744 hectares and commands a selling price of
P50.00/sqm
LV = (P23.31 x 0.6) + (P50 x 0.3) + (P15.95 x 0.1)
= P13.986 + P15.00 + P1.820
= P30.80 x 118,744 sqm
LV = P3,658,027.00
Total LV = P27,682,754.00 + P18,842,745.00 + P3,658,027.00
= P50,431,506.00
The CA justified this second alternative by harking on the established judicial
prerogative of the courts to determine the amount of just compensation, upon
proper evaluation of the three factors and with due consideration of the list
provided in Section 17 of R.A. No. 6657. Thus, the CA considered the data used
by the LBP (for the CNI) and by the respondents (for the CS) as substantially
compliant and therefore relevant and applicable despite the respective
objections raised by the parties to the others computation.
The Courts Ruling
After consideration of the record and of the parties respective arguments, we
adopt the second alternative recommended by the CA using the basic formula
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1). We, however, arrived at the
slightly different amount of Fifty Million, Four Hundred Thirty-Two
Thousand, Sixty-Three Pesos and 89/100 (P50,432,063.89).
We find that the second alternative presents a more accurate formula and
computation in the determination of the just compensation due the
respondents for their property. As pointed out earlier, DAR A.O. No. 05-98
provides the basic formula LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) for
valuating lands acquired pursuant to the governments agrarian reform
program. In cases where not all three factors of CNI, CS and MV are present,
relevant and applicable, the same regulation provides three alternate formulae
that can be used to compute for just compensation.
In the present case, we deem all three factors of CNI, CS and MV relevant
and applicable for, as the CA observed, they substantially complied with the
prescribed formula. In disregarding the computation proposed by the LBP, the
CA found inapplicable the data necessary to compute the CNI because they
pertained to different locations and calendar years. Nevertheless, in offering
the second alternative which used the prescribed basic formula, the CA
essentially pointed out that the data necessary for determining the CS were
equally inapplicable as they did not comply with the requirements of Items
II.C.2.b and II.C.2.c of DAR A.O. No. 05-98. If we were to strictly apply the
formula laid down in DAR A.O. No. 05-98 and disregard both the CNI and CS
factors to be equally flawed, then the only present, relevant and applicable
factor left is MV, which, when used following the third alternate formula LV
= MV x 2, will significantly reduce the just compensation to an absurd
amount. Clearly, we cannot support this, as our agrarian reform laws never
intended to deprive landowners of their property without just compensation.
Just compensation refers to the full and fair equivalent of the property taken
from the owner.30 In several cases,31 we emphasized that to be just, the
compensation must be real, substantial, full and ample.
Applying, therefore, the values used by the LBP for the factors CNI (P23.31)
and MV (P18.20455) and the value used by the respondents for the factor CS
(P100, P75 and P50), we compute the just compensation (with emphasis on the
figures that differed from those found in the CAs computation) as
follows:cralawlibrary
Lot A = consisting of 60.7331 hectares with a selling price of P100.00/sqm
LV = (P23.31 x 0.6) + (P100 x 0.3) + (P18.20455 x 0.1)
= P13.986 + P30.00 + P1.820455
= P45.806455 x 607,331 sqm
LV = P27,819,680.121605
Lot B = consisting of 49.4807 hectares with a selling price of P75.00/sqm
LV = (P23.31 x 0.6) + (P75 x 0.3) + (P18.20455 x 0.1)
= P13.986 + P22.5 + P1.820455 in 1972 pursuant to its agrarian reform program. More than four decades and
= P38.306455 x 494,807 sqm three generations of the Gallegos after,33 the respondents have yet to receive
LV = P18,954,302.079185 the full and fair equivalent of the property taken from them. All of the farmer-
beneficiaries of their property had benefited and continues to benefit from the
Lot C = consisting of 11.8744 hectares with a selling price of P50.00/sqm portions respectively received by each of them, and, in fact, several of them
had either sold or converted their respective portions to non-agricultural
LV = (P23.31 x 0.6) + (P50 x 0.3) + (P18.20455 x 0.1) ventures, contrary to the intents of our agrarian reform laws. The respondents,
= P13.986 + P15.00 + P1.820455 all the while however, had been permanently deprived of any income from
= P30.806455 x 118,744 sqm their property.
LV = P3,658,081.69252
We also observed that the LBP initially valued the respondents property at
Total LV = P27,819,680.121605 + P18,954,302.079185 P12,110.11/h (totaling P1,289,674.27 for 106.4957h) 34 which is roughly 97%
+ P3,658,081.69252 lower than the RTC-SACs valuation of P425,000.00/h (totaling P52,209,720.00
Total LV = P50,432,063.89331 for 122.8464h).35 As we held in Apo Fruits Corporation v. Land Bank of the
Philippines,36 this staggering difference in the valuation of the respondents
Considering that as of May 26, 2010, the respondents had already received a property betrays the lack of good faith on the part of the government in
total of Twenty-Nine Million, Five Hundred Thirty-Eight Thousand, Eight dealing with the landowners.37 The sheer inadequacy of this amount
Hundred Twenty Pesos and 38/100 (P29,538,820.38) as partial payment,32 they prompted the respondents to initiate this action. Twenty years passed and
should now receive the balance of Twenty Million, Eight Hundred Ninety- long after the title to the respondents property had been transferred to the
Three Thousand, Two Hundred Forty-Three Pesos and 51/100 various farmer-beneficiaries,38 the respondents have only been paid a total of
(P20,893,243.51) which represents the difference between the just P29,538,820.38 (the bulk of which P26,359,793.38 - was paid only in 2010) or
compensation of P50,432,063.89 and the amount they have received. roughly half of the actual value of their property as finally determined by this
Court.
The respondents are entitled to an award
of 12% per annum on the amount of just These circumstances the gross inadequacy of the LBPs valuation of the
compensation for the LBPs delay in respondents property and the loss of income suffered by the respondents -
payment taken together undeniably confirm the unconscionable delay in the payment
of just compensation. Just compensation does not only refer to the full and
As a final note, we observe that the CA did not make any finding or fair equivalent of the property taken; it also means, equally if not more than
recommendation with regard to the interests to which the respondents may anything, payment in full without delay.39 Consequently, we deem it proper
be entitled to receive in addition to the just compensation. In their various to award the respondents 12% interest per annum from the time of taking until
pleadings before the lower courts, the respondents prayed for the payment of full payment. In several cases,40 this Court has awarded, by way of damages,
interests in addition to the proper determination of the just compensation due 12% interest on the amount of just compensation, which, in effect, makes the
them. We cannot disregard the significance of their prayer for the records and obligation on the part of the government one of forbearance.41 This is to
the surrounding circumstances of this case sufficiently convince us that a ensure prompt payment of the value of the land and limit the opportunity loss
delay in the payment occurred chargeable to the LBP. of the owner that can drag from days to decades. 42cralaw virtualaw library

The records show that the government had taken the respondents property
WHEREFORE, in view of these considerations, we collectively hereby award
respondents Manuel O. Gallego, Jr., Joseph L. Gallego, and Christopher L.
Gallego the sum of Fifty-Two Million, Four Hundred Thirty-Two Thousand,
Sixty-Three Pesos and 89/100 (P52,432,063.89) as just compensation for the
property covered by G.R. No. 173226, Land Bank of the Philippines v. Manuel O.
Gallego, Jr., et al., with interests at twelve percent (12%) on the outstanding
principal. In light of the initial payments of P1,179,027.00 (per the May 13, 2002
Regional Trial Court-Special Agrarian Court order), P2,000,000.00 (per the
November 5, 2004 Court of Appeals resolution), and P26,359,793.38 (per the
May 26, 2010 letter of the respondents counsel), corresponding deductions
should be made from the total principal due in reckoning the interests and the
total amount still due as final payment under this Resolution. No costs.

SO ORDERED.
Republic of the Philippines acquired a 21.2192-ha. portion (subject land) of respondents property
SUPREME COURT pursuant to the governments Operation Land Transfer Program7 under
Manila Presidential Decree No. (PD) 27,8 otherwise known as the "Tenants
Emancipation Decree," as amended. On November 29, 1995, the DAR caused
SECOND DIVISION the generation of emancipation patents (EPs) in favor of the farmer-
beneficiaries,9 and, in 1996, the LBP fixed the value of the subject land at
G.R. No. 183290* July 9, 2014 P361,181.8710 (LBP valuation) using the formula11 under Executive Order No.
(EO) 22812 and DAR Administrative Order No. (AO) 13, series of 1994,13 i.e.,
DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY LV = (2.5 x AGP x P35.00) x (1.06)n14 .Under this formula, the government
NASSER C. PANGANDAMAN, Petitioner, support price (GSP) for one (1) cavan of palay was pegged at P35.00, which is
vs. the GSP price set on the date of PD 27s effectivity on October 21, 1972.15
SPOUSES DIOSDADO STA. ROMANA and RESURRECCION O.
RAMOS, represented by AURORA STA. ROMANA, PURIFICACION C. Dissatisfied with the LBP valuation, respondents filed a Petition for Approval
DAEZ, represented by EFREN D. VILLALUZ and ROSAURO D. and Appraisal of Just Compensation before the RTC, docketed as AGR. Case
VILLALUZ, and SPOUSES LEANDRO C. SEVILLA and MILAGROS C. No. 1163-G, averring that: (a) the LBP valuation was grossly inadequate
DAEZ, Respondents. considering the subject lands proximity to subdivision lots and commercial
establishments; and (b) the fair market value of the subject land should be
RESOLUTION fixed in the amount of at least P300,000.00/ha. as some beneficiaries were even
selling their lands to subdivision developers at the price of
PERLAS-BERNABE, J.: P1,000,000.00/ha.16

Assailed in this petition for review on certiorari1 are the Decision2 dated
March 27, 2008 and the Resolution3 dated June 12, 2008 rendered by the Court
of Appeals (CA) in CA-G.R. SP Nos. 93132 and 93240 which affirmed the
Decision4 dated October 18, 2005 of the Regional Trial Court of Guimba,
Nueva Ecija, Branch 33 (RTC) in AGR. Case No. 1163-G,5 fixing the just
compensation for respondents 21.2192-hectare (ha.) land at P2,576,829.94 or
P121,438.60/ha., and ordering the Land Bank of the Philippines (LBP) to pay
the said amount in the manner provided by law.
The Facts
Respondents, spouses Diosdado Sta. Romana and Resurreccion O. Ramos,
represented by Aurora Sta. Romana, Purificacion C. Daez, represented by
Efren D. Villaluz and Rosauro D. Villaluz, and spouses Leandro C. Sevilla and
Milagros C. Daez, are the owners of a 27.5307-ha. agricultural land situated in
San Jose City, Nueva Ecija, covered by Transfer Certificate of Title No. NT-
66211.6 Petitioner, the Department of Agrarian Reform (DAR), compulsorily
On the other hand, the LBP insisted on the correctness of the valuation, having
been computed in accordance with the formula under EO 228 which governs
the determination of just compensation due a landowner whose property was
seized under PD 27. For its part, the DAR maintained that the proper
procedure relevant to the determination of the valuation was followed, hence,
the amount of P361,181.87 or P4,719.77/ha. was in keeping with the mandate
of PD 27.17
The RTC appointed two18 (2) commissioners for the purpose. On August 27,
2004, the commissioners submitted their report, recommending the amount of
P300,000.00/ha. as reasonable compensation for the subject land.19
The RTC Ruling
On October 18, 2005, the RTC rendered a Decision20 rejecting the LBP
valuation and fixing the just compensation of the subject land at P2,576,829.94
or P121,438.60/ha. It explained that while respondents land was acquired
pursuant to PD 27, the same is covered by Republic Act No. (RA) 6657,21
otherwise known as the "Comprehensive Agrarian Reform Law of 1988," as
amended, which provides that in determining just compensation, the factors
under Section 17 of RA 6657, as amended, should be considered.22 It likewise
pointed out that t he Court, in the case of LBP v. Spouses Banal,23 had declared
that the abovementioned factors have already been translated into a basic
formula in DAR AO 6, series of 1992,24 as amended by DAR AO 11, series of
1994,25 i.e., LV = (CNI + 0.6) + (CS x 0.3) + (MV x 0.1).26 Considering the
availability of only the CS27 and MV28 factors, the RTC applied the formula
LV = (CS x 0.9) + (MV x 0.1) in fixing the just compensation for the subject
land.29
The DAR and the LBP filed separate motions for reconsideration which were,
however, denied by the RTC. Hence, they filed separate appeals before the
CA, respectively docketed as CA-G.R. SP Nos. 93132 and 93240, that were,
thereafter, consolidated by the CA on August 31, 2006.30
The CA Ruling
In a Decision31 dated March 27, 2008, the CA affirmed the RTC Decision,
explaining that the expropriation of a landholding covered by PD 27, such as
that of the subject land, is not considered to have taken place on the effectivity
of the said decree, or on October 21, 1972, but at the time payment of just
compensation is made, as judicially determined. Thus, it would be inequitable
to base the amount of just compensation on the guidelines provided by PD 27
and EO 228 when the seizure of the subject land took place after the enactment
of RA 665732 on June 15, 1988. The acquisition of the subject land having been
initiated only in 1995, the LBP valuation using the formula under EO 228 was
confiscatory , as just compensation should constitute the full and fair
equivalent of the property when it is taken. Considering that the agrarian
reform process remained incomplete as the payment of the just compensation
for the subject land has yet to be made, and in view of the passage of RA 6657
in the interim, the CA upheld the RTC valuation as having been computed in
accordance with Section 17 of RA 6657, as amended.33
The motions for reconsideration filed by the DAR and the LBP were denied in
a Resolution34 dated June 12, 2008, hence, the instant petition by the DAR
which was subsequently consolidated35 with the LBPs petition in G.R. Nos.
183298-99.
The Issue Before the Court
The essential issue for the Courts resolution is whether or not the subject land
was properly valued in accordance with the factors set forth in Section 17 of
RA 6657, as amended. The Proceedings Before the Court
In a Resolution36 dated October 12, 2009, the parties were directed to file their
respective memoranda. In lieu of a memorandum, however, the LBP filed a
manifestation and motion37 (motion to withdraw and to remand) in G.R. Nos.
183298-99 (a) averring that the matter of computation of just compensation
had been rendered moot and academic by the enactment of RA 9700,38 which
ordains that when the valuation of previously acquired lands is challenged by
the landowner, the same shall be completed and finally resolved pursuant to
Section 17 of RA 6657, as amended;39 and (b) praying that it be allowed to
withdraw its petition and that the case be remanded to the RTC for re-
computation of the just compensation of the subject land40 based on the
factors set forth under Section 17 of RA 6657, as amended, in relation to Section
541 of RA 9700.
The respondents in the said cases, who are the same respondents in the instant
case, did not oppose the motion to withdraw and to remand, which the Court
granted in a Resolution42 dated January 18, 2010. Neither did they file any
motion for reconsideration therefrom.
On the other hand, the DAR filed a memorandum,43 praying for the adoption
of the LBP valuation for the subject land, or in the alternative, for a similar
remand of the case to the RTC for further proceedings to determine the value
of the land in accordance with existing provisions of law and applicable
administrative issuances.
The Courts Ruling
Settled is the rule that when the agrarian reform process is still incomplete, as
in this case where the just compensation for the subject land acquired under
PD 27 has yet to be paid, just compensation should be determined and the
process concluded under RA 6657,44 with PD 27 and EO 228 having mere
suppletory effects. This means that PD 27 and EO 228 only apply when there
are gaps in RA 6657; where RA 6657 is sufficient, PD 27 and EO 228 are
superseded.45
For purposes of determining just compensation, the fair market value of an
expropriated property is determined by its character and its price at the time
of taking.46 In addition, the factors enumerated under Section 17 of RA
6657,47 i.e., (a) the acquisition cost of the land, (b) the current value of like
properties, (c) the nature and actual use of the property, and the income
therefrom, (d) the owner's sworn valuation, (e) the tax declarations, (f) the
assessment made by government assessors, (g) the social and economic
benefits contributed by the farmers and the farmworkers, and by the
government to the property, and (h) the non-payment of taxes or loans secured
from any government financing institution on the said land, if any , must be
equally considered.1wphi1
The Court has gone over the records and observed that the only factors
considered by the RTC in determining the just compensation for the subject
land were (a) the acquisition price of a 5.5825-ha. landholding situated in the
same locality paid to the owner on November 17, 1997,48 and (b) the market
value of the subject land declared by the respondents, without a showing that
the other factors under Section 17 of RA 6657 , as amended, were even taken
into account or, otherwise, found to be inapplicable , contrary to what the law
requires. Consequently, the CA erred in upholding the RTCs valuation as
having been made in accordance with Section 17 of RA 6657, as amended.
This, considering too that the records of AGR. Case No. 1163-G on LBPs
petition for review, docketed as G.R. Nos. 183298-99, had already been
remanded to the RTC, the Court finds that there is a need to make a similar
remand of DAR s present petition in this case also stemming from AGR. Case
No. 1163-G to the same RTC for the determination of just compensation in
accordance with Section 17 of RA 6657, as amended. Aside from the
requirement and need to apply the factors under Section 17 of RA 6657, as
amended, this course of action is also meant to avoid the possibility of any
conflict or inconsistency with any eventual ruling in AGR. Case No. 1163-G.
To this end, the RTC is hereby directed to observe the following guidelines in
the remand of the case:
1. Just compensation must be valued at the time of taking, or the time
when the landowner was deprived of the use and benefit of his
property, such as when title is transferred in the name of the Republic
of the Philippines.49 Hence, the evidence to be presented by the
parties before the trial court for the valuation of the subject land must
be based on the values prevalent on such time of taking for like
agricultural lands.50
2. The evidence must conform with Section 17 of RA 6657, as
amended, prior to its amendment by RA 9700. It bears pointing out
that while Congress passed RA 9700 on July 1, 2009, amending certain
provisions of RA 6657, as amended, among them, Section 17, and
declaring "(t)hat all previously acquired lands wherein valuation is
subject to challenge by landowners shall be completed and finally
resolved pursuant to Section 17 of [RA 6657], as amended,"51 the law
should not be retroactively applied to pending claims/cases. In fact,
DAR AO 2, series of 2009,52 implementing RA 9700, expressly
excepted from the application of the amended Section 17 all claim
folders received by LBP prior to July 1, 20 09, which shall be valued in
accordance with Section 17 of RA 6657, as amended, prior to its further
amendment by RA 9700.53
With this in mind, the Court, cognizant of the fact that the instant
petition for review on certiorari was filed on July 21, 2008,54 or long
before the passage of RA 9700, finds that Section 17 of RA 6657, as
amended, prior to its further amendment by RA 9700, should control
the challenged valuation. In the event that the respondents had
already withdrawn the amount deposited by the LB P, the withdrawn
amount should be deducted from the final land valuation to be paid
by LBP.55
3. The Regional Trial Court may impose interest on the just
compensation award as may be warranted by the circumstances of the
case.56 In previous cases, the Court has allowed the grant of legal
 interest in expropriation cases where there is delay in the payment
since the just compensation due to the landowners was deemed to be
an effective forbearance on the part of the State.57 Legal interest shall
be pegged at the rate of 12% interest per annum (p.a.). from the time
of taking until June 30, 2013 only. Thereafter, or beginning July 1, 2013,
until fully paid, the just compensation due the landowners shall earn
interest at the new legal rate of 6% interest p.a. in line with the
amendment introduced by BSP-MB Circular No. 799,58 series of
2013.59
4. The Regional Trial Court is reminded, however, that while it should
take into account the different formula created by the DAR in arriving
at its just compensation valuation, it is not strictly bound thereto if the
situations before it do not warrant their application. As held in LBP v.
Heirs of Maximo Puyat:60
[T]he determination of just compensation is a judicial function; hence, courts
cannot be unduly restricted in their determination thereof. To do so would
deprive the courts of their judicial prerogatives and reduce them to the
bureaucratic function of inputting data and arriving at the valuation. While
the courts should be mindful of the different formulae created by the DAR in
arriving at just compensation, they are not strictly bound to adhere thereto if
the situations before them do not warrant it. Apo Fruits Corporation v. Court
of Appeals thoroughly discusses this issue, to wit:
"x x x [T]he basic formula and its alternativesadministratively determined (as
it is not found in Republic Act No. 6657, but merely set forth in DAR AO No.
5, Series of 1998)although referred to and even applied by the courts in
certain instances, does not and cannot strictly bind the courts. To insist that
the formula must be applied with utmost rigidity whereby the valuation is
drawn following a strict mathematical computation goes beyond the intent
and spirit of the law. The suggested interpretation is strained and would
render the law inutile. Statutory construction should not kill but give life to
the law. As we have established in earlier jurisprudence, the valuation of
property in eminent domain is essentially a judicial function which is vested
in the regional trial court acting as a SAC, and not in administrative agencies.
The SAC, therefore, must still be able to reasonably exercise its judicial
discretion in the evaluation of the factors for just compensation, which cannot
be arbitrarily restricted by a formula dictated by the DAR, an administrative
agency. Surely, DAR AO No. 5 did not intend to straightjacket the hands of
the court in the computation of the land valuation. While it provides a
formula, it could not have been its intention to shackle the courts into applying
the formula in every instance. The court shall apply the formula after an
evaluation of the three factors, or it may proceed to make its own computation
based on the extended list in Section 17 of Republic Act No. 6657, which
includes other factors[.] x x x."61
WHEREFORE, the petition is DENIED insofar as it seeks to sustain the
valuation of the 21.2192-hectare portion of respondents' property made by the
Land Bank of the Philippines. The Decision dated March 27, 2008 and the
Resolution dated June 12, 2008 rendered by the Court of Appeals in CAG.R.
SP Nos. 93132 and 93240 upholding the said valuation which did not consider
the factors enumerated under Section 17 of Republic Act No. 6657, as
amended, are hereby REVERSED and SET ASIDE. The Department of
Agrarian Reform's petition stemming from AGR. Case No. 1163-G is
REMANDED to the Regional Trial Court of Guimba, Nueva Ecija, Branch 33
for reception of evidence on the issue of just compensation in accordance with
the guidelines set in this Decision. The trial court is directed to conduct the
proceedings in said case with reasonable dispatch and to submit to the Court
a report on its findings and recommended conclusions within sixty (60) days
from notice of this Decision.
SO ORDERED.
EN BANC
[G.R. No. 161656. June 29, 2005]
REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA,
COMMODORE EDGARDO GALEOS, ANTONIO CABALUNA, DOROTEO
MANTOS & FLORENCIO BELOTINDOS, petitioners, vs. VICENTE G. LIM,
respondent.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
Justice is the first virtue of social institutions.[1] When the state wields its
power of eminent domain, there arises a correlative obligation on its part to
pay the owner of the expropriated property a just compensation. If it fails,
there is a clear case of injustice that must be redressed. In the present case,
fifty-seven (57) years have lapsed from the time the Decision in the subject
expropriation proceedings became final, but still the Republic of the
Philippines, herein petitioner, has not compensated the owner of the property.
To tolerate such prolonged inaction on its part is to encourage distrust and
resentment among our people the very vices that corrode the ties of civility
and tempt men to act in ways they would otherwise shun.
A revisit of the pertinent facts in the instant case is imperative.
On September 5, 1938, the Republic of the Philippines (Republic) instituted a
special civil action for expropriation with the Court of First Instance (CFI) of
Cebu, docketed as Civil Case No. 781, involving Lots 932 and 939 of the
Banilad Friar Land Estate, Lahug, Cebu City, for the purpose of establishing a
military reservation for the Philippine Army. Lot 932 was registered in the
name of Gervasia Denzon under Transfer Certificate of Title (TCT) No. 14921
with an area of 25,137 square meters, while Lot 939 was in the name of Eulalia
Denzon and covered by TCT No. 12560 consisting of 13,164 square meters.
After depositing P9,500.00 with the Philippine National Bank, pursuant to the
Order of the CFI dated October 19, 1938, the Republic took possession of the
lots. Thereafter, or on May 14, 1940, the CFI rendered its Decision ordering the
Republic to pay the Denzons the sum of P4,062.10 as just compensation.
The Denzons interposed an appeal to the Court of Appeals but it was
dismissed on March 11, 1948. An entry of judgment was made on April 5,
1948.
In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the National
Airports Corporation a claim for rentals for the two lots, but it denied
knowledge of the matter. Another heir, Nestor Belocura, brought the claim to
the Office of then President Carlos Garcia who wrote the Civil Aeronautics
Administration and the Secretary of National Defense to expedite action on
said claim. On September 6, 1961, Lt. Manuel Cabal rejected the claim but
expressed willingness to pay the appraised value of the lots within a
reasonable time.
For failure of the Republic to pay for the lots, on September 20, 1961, the
Denzons successors-in-interest, Francisca Galeos-Valdehueza and Josefina
Galeos-Panerio,[2] filed with the same CFI an action for recovery of
possession with damages against the Republic and officers of the Armed
Forces of the Philippines in possession of the property. The case was docketed
as Civil Case No. R-7208.
In the interim or on November 9, 1961, TCT Nos. 23934 and 23935 covering
Lots 932 and 939 were issued in the names of Francisca Valdehueza and
Josefina Panerio, respectively. Annotated thereon was the phrase subject to the
priority of the National Airports Corporation to acquire said parcels of land,
Lots 932 and 939 upon previous payment of a reasonable market value.
On July 31, 1962, the CFI promulgated its Decision in favor of Valdehueza and
Panerio, holding that they are the owners and have retained their right as such
over Lots 932 and 939 because of the Republics failure to pay the amount of
P4,062.10, adjudged in the expropriation proceedings. However, in view of the
annotation on their land titles, they were ordered to execute a deed of sale in
favor of the Republic. In view of the differences in money value from 1940 up
to the present, the court adjusted the market value at P16,248.40, to be paid
with 6% interest per annum from April 5, 1948, date of entry in the
expropriation proceedings, until full payment.
After their motion for reconsideration was denied, Valdehueza and Panerio
appealed from the CFI Decision, in view of the amount in controversy, directly
to this Court. The case was docketed as No. L-21032.[3] On May 19, 1966, this
Court rendered its Decision affirming the CFI Decision. It held that
Valdehueza and Panerio are still the registered owners of Lots 932 and 939,
there having been no payment of just compensation by the Republic.
Apparently, this Court found nothing in the records to show that the Republic
paid the owners or their successors-in-interest according to the CFI decision.
While it deposited the amount of P9,500,00, and said deposit was allegedly
disbursed, however, the payees could not be ascertained.
Notwithstanding the above finding, this Court still ruled that Valdehueza and
Panerio are not entitled to recover possession of the lots but may only demand
the payment of their fair market value, ratiocinating as follows:
Appellants would contend that: (1) possession of Lots 932 and 939 should be
restored to them as owners of the same; (2) the Republic should be ordered to
pay rentals for the use of said lots, plus attorneys fees; and (3) the court a quo
in the present suit had no power to fix the value of the lots and order the
execution of the deed of sale after payment.
It is true that plaintiffs are still the registered owners of the land, there not
having been a transfer of said lots in favor of the Government. The records do
not show that the Government paid the owners or their successors-in-interest
according to the 1940 CFI decision although, as stated, P9,500.00 was
deposited by it, and said deposit had been disbursed. With the records lost,
however, it cannot be known who received the money (Exh. 14 says: It is
further certified that the corresponding Vouchers and pertinent Journal and
Cash Book were destroyed during the last World War, and therefore the
names of the payees concerned cannot be ascertained.) And the Government
now admits that there is no available record showing that payment for the
value of the lots in question has been made (Stipulation of Facts, par. 9, Rec.
on Appeal, p. 28).
The points in dispute are whether such payment can still be made and, if so,
in what amount. Said lots have been the subject of expropriation
proceedings. By final and executory judgment in said proceedings, they
were condemned for public use, as part of an airport, and ordered sold to
the Government. In fact, the abovementioned title certificates secured by
plaintiffs over said lots contained annotations of the right of the National
Airports Corporation (now CAA) to pay for and acquire them. It follows that
both by virtue of the judgment, long final, in the expropriation suit, as well
as the annotations upon their title certificates, plaintiffs are not entitled to
recover possession of their expropriated lots which are still devoted to the
public use for which they were expropriated but only to demand the fair
market value of the same.
Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente
Lim, herein respondent,[4] as security for their loans. For their failure to pay
Lim despite demand, he had the mortgage foreclosed in 1976. Thus, TCT No.
23934 was cancelled, and in lieu thereof, TCT No. 63894 was issued in his
name.
On August 20, 1992, respondent Lim filed a complaint for quieting of title
with the Regional Trial Court (RTC), Branch 10, Cebu City, against General
Romeo Zulueta, as Commander of the Armed Forces of the Philippines,
Commodore Edgardo Galeos, as Commander of Naval District V of the
Philippine Navy, Antonio Cabaluna, Doroteo Mantos and Florencio
Belotindos, herein petitioners. Subsequently, he amended the complaint to
implead the Republic.
On May 4, 2001, the RTC rendered a decision in favor of respondent, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim
and against all defendants, public and private, declaring plaintiff Vicente
Lim the absolute and exclusive owner of Lot No. 932 with all the rights of
an absolute owner including the right to possession. The monetary claims in
the complaint and in the counter claims contained in the answer of defendants
are ordered Dismissed.
Petitioners elevated the case to the Court of Appeals, docketed therein as CA-
G.R. CV No. 72915. In its Decision[5] dated September 18, 2003, the Appellate
Court sustained the RTC Decision, thus:
Obviously, defendant-appellant Republic evaded its duty of paying what
was due to the landowners. The expropriation proceedings had already
become final in the late 1940s and yet, up to now, or more than fifty (50)
years after, the Republic had not yet paid the compensation fixed by the
court while continuously reaping benefits from the expropriated property
to the prejudice of the landowner. x x x. This is contrary to the rules of fair
play because the concept of just compensation embraces not only the correct
determination of the amount to be paid to the owners of the land, but also
the payment for the land within a reasonable time from its taking. Without
prompt payment, compensation cannot be considered just for the property
owner is made to suffer the consequence of being immediately deprived of
his land while being made to wait for a decade or more, in this case more
than 50 years, before actually receiving the amount necessary to cope with
the loss. To allow the taking of the landowners properties, and in the
meantime leave them empty-handed by withholding payment of
compensation while the government speculates on whether or not it will
pursue expropriation, or worse, for government to subsequently decide to
abandon the property and return it to the landowners, is undoubtedly an
oppressive exercise of eminent domain that must never be sanctioned. (Land
Bank of the Philippines vs. Court of Appeals, 258 SCRA 404).
xxxxxx
Undaunted, petitioners, through the Office of the Solicitor General, filed with
this Court a petition for review on certiorari alleging that the Republic has
remained the owner of Lot 932 as held by this Court in Valdehueza vs.
Republic.[6]
In our Resolution dated March 1, 2004, we denied the petition outright on the
ground that the Court of Appeals did not commit a reversible error. Petitioners
filed an urgent motion for reconsideration but we denied the same with
finality in our Resolution of May 17, 2004.
On May 18, 2004, respondent filed an ex-parte motion for the issuance of an
entry of judgment. We only noted the motion in our Resolution of July 12,
2004.
On July 7, 2004, petitioners filed an urgent plea/motion for clarification, which
is actually a second motion for reconsideration. Thus, in our Resolution of
September 6, 2004, we simply noted without action the motion considering
that the instant petition was already denied with finality in our Resolution of
May 17, 2004.

On October 29, 2004, petitioners filed a very urgent motion for leave to file a
An action to quiet title is a common law remedy for the removal of any cloud
motion for reconsideration of our Resolution dated September 6, 2004 (with
or doubt or uncertainty on the title to real property. It is essential for the
prayer to refer the case to the En Banc). They maintain that the Republics right
plaintiff or complainant to have a legal or equitable title or interest in the real
of ownership has been settled in Valdehueza.
property, which is the subject matter of the action. Also the deed, claim,
encumbrance or proceeding that is being alleged as cloud on plaintiffs title
The basic issue for our resolution is whether the Republic has retained
must be shown to be in fact invalid or inoperative despite its prima facie
ownership of Lot 932 despite its failure to pay respondents predecessors-in-
appearance of validity or legal efficacy (Robles vs. Court of Appeals, 328 SCRA
interest the just compensation therefor pursuant to the judgment of the CFI
97). In view of the foregoing discussion, clearly, the claim of defendant-
rendered as early as May 14, 1940.
appellant Republic constitutes a cloud, doubt or uncertainty on the title of
plaintiff-appellee Vicente Lim that can be removed by an action to quiet
Initially, we must rule on the procedural obstacle.
title.

While we commend the Republic for the zeal with which it pursues the present
WHEREFORE, in view of the foregoing, and finding no reversible error in the
case, we reiterate that its urgent motion for clarification filed on July 7, 2004 is
appealed May 4, 2001 Decision of Branch 9, Regional Trial Court of Cebu City,
actually a second motion for reconsideration. This motion is prohibited under
in Civil Case No. CEB-12701, the said decision is UPHELD AND AFFIRMED.
Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as amended, which
Accordingly, the appeal is DISMISSED for lack of merit.
provides:
Sec. 2. Second motion for reconsideration. No second motion for reconsideration
of a judgment or final resolution by the same party shall be entertained.
Consequently, as mentioned earlier, we simply noted without action the
motion since petitioners petition was already denied with finality.
Considering the Republics urgent and serious insistence that it is still the
owner of Lot 932 and in the interest of justice, we take another hard look at the
controversial issue in order to determine the veracity of petitioners stance.
One of the basic principles enshrined in our Constitution is that no person
shall be deprived of his private property without due process of law; and in
expropriation cases, an essential element of due process is that there must be
just compensation whenever private property is taken for public use.[7]
Accordingly, Section 9, Article III, of our Constitution mandates: Private
property shall not be taken for public use without just compensation.
The Republic disregarded the foregoing provision when it failed and refused
to pay respondents predecessors-in-interest the just compensation for Lots 932
and 939. The length of time and the manner with which it evaded payment
demonstrate its arbitrary high-handedness and confiscatory attitude. The final
judgment in the expropriation proceedings (Civil Case No. 781) was entered
on April 5, 1948. More than half of a century has passed, yet, to this day, the
landowner, now respondent, has remained empty-handed. Undoubtedly,
over 50 years of delayed payment cannot, in any way, be viewed as fair. This
is more so when such delay is accompanied by bureaucratic hassles. Apparent
from Valdehueza is the fact that respondents predecessors-in-interest were
given a run around by the Republics officials and agents. In 1950, despite the
benefits it derived from the use of the two lots, the National Airports
Corporation denied knowledge of the claim of respondents predecessors-in-
interest. Even President Garcia, who sent a letter to the Civil Aeronautics
Administration and the Secretary of National Defense to expedite the
payment, failed in granting relief to them. And, on September 6, 1961, while
the Chief of Staff of the Armed Forces expressed willingness to pay the
appraised value of the lots, nothing happened.
The Court of Appeals is correct in saying that Republics delay is contrary to
the rules of fair play, as just compensation embraces not only the correct
determination of the amount to be paid to the owners of the land, but also
the payment for the land within a reasonable time from its taking. Without
prompt payment, compensation cannot be considered just. In jurisdictions
similar to ours, where an entry to the expropriated property precedes the
payment of compensation, it has been held that if the compensation is not paid
in a reasonable time, the party may be treated as a trespasser ab initio.[8]
Corollarily, in Provincial Government of Sorsogon vs. Vda. De Villaroya,[9] similar
to the present case, this Court expressed its disgust over the governments
vexatious delay in the payment of just compensation, thus:
The petitioners have been waiting for more than thirty years to be paid for
their land which was taken for use as a public high school. As a matter of
fair procedure, it is the duty of the Government, whenever it takes property
from private persons against their will, to supply all required documentation
and facilitate payment of just compensation. The imposition of unreasonable
requirements and vexatious delays before effecting payment is not only
galling and arbitrary but a rich source of discontent with government. There
should be some kind of swift and effective recourse against unfeeling and
uncaring acts of middle or lower level bureaucrats.
We feel the same way in the instant case.
More than anything else, however, it is the obstinacy of the Republic that
prompted us to dismiss its petition outright. As early as May 19, 1966, in
Valdehueza, this Court mandated the Republic to pay respondents
predecessors-in-interest the sum of P16,248.40 as reasonable market value of
the two lots in question. Unfortunately, it did not comply and allowed several
decades to pass without obeying this Courts mandate. Such prolonged
obstinacy bespeaks of lack of respect to private rights and to the rule of law,
which we cannot countenance. It is tantamount to confiscation of private
property. While it is true that all private properties are subject to the need of
government, and the government may take them whenever the necessity or
the exigency of the occasion demands, however, the Constitution guarantees
that when this governmental right of expropriation is exercised, it shall be
attended by compensation.[10] From the taking of private property by the
government under the power of eminent domain, there arises an implied
promise to compensate the owner for his loss.[11]
Significantly, the above-mentioned provision of Section 9, Article III of the
Constitution is not a grant but a limitation of power. This limiting function is
in keeping with the philosophy of the Bill of Rights against the arbitrary
exercise of governmental powers to the detriment of the individuals rights.
Given this function, the provision should therefore be strictly interpreted
against the expropriator, the government, and liberally in favor of the
property owner.[12]
Ironically, in opposing respondents claim, the Republic is invoking this Courts
Decision in Valdehueza, a Decision it utterly defied. How could the Republic
acquire ownership over Lot 932 when it has not paid its owner the just compensation,
required by law, for more than 50 years? The recognized rule is that title to the
property expropriated shall pass from the owner to the expropriator only
upon full payment of the just compensation. Jurisprudence on this settled
principle is consistent both here and in other democratic jurisdictions. In
Association of Small Landowners in the Philippines, Inc. et al., vs. Secretary of
Agrarian Reform,[13] thus:
Title to property which is the subject of condemnation proceedings does not
vest the condemnor until the judgment fixing just compensation is entered
and paid, but the condemnors title relates back to the date on which the
petition under the Eminent Domain Act, or the commissioners report under
the Local Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the
owner until payment is actually made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding
that title to property does not pass to the condemnor until just compensation
had actually been made. In fact, the decisions appear to be uniform to this
effect. As early as 1838, in Rubottom v. McLure, it was held that actual payment
to the owner of the condemned property was a condition precedent to the
investment of the title to the property in the State albeit not to the
appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of
New York said that the construction upon the statutes was that the fee did not
vest in the State until the payment of the compensation although the authority
to enter upon and appropriate the land was complete prior to the payment.
Kennedy further said that both on principle and authority the rule is . . . that
the right to enter on and use the property is complete, as soon as the property
is actually appropriated under the authority of law for a public use, but that
the title does not pass from the owner without his consent, until just
compensation has been made to him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes,
that:
If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation
adopted in this jurisdiction is such as to afford absolute reassurance that no
piece of land can be finally and irrevocably taken from an unwilling owner
until compensation is paid...(Emphasis supplied.)
Clearly, without full payment of just compensation, there can be no transfer
of title from the landowner to the expropriator. Otherwise stated, the
Republics acquisition of ownership is conditioned upon the full payment of
just compensation within a reasonable time.[14]
Significantly, in Municipality of Bian v. Garcia[15] this Court ruled that the
expropriation of lands consists of two stages, to wit:
x x x The first is concerned with the determination of the authority of the
plaintiff to exercise the power of eminent domain and the propriety of its
exercise in the context of the facts involved in the suit. It ends with an order,
if not of dismissal of the action, of condemnation declaring that the plaintiff
has a lawful right to take the property sought to be condemned, for the public
use or purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the complaint x
x x.
The second phase of the eminent domain action is concerned with the
determination by the court of the just compensation for the property sought
to be taken. This is done by the court with the assistance of not more than three
(3) commissioners. x x x.
It is only upon the completion of these two stages that expropriation is said to
have been completed. In Republic v. Salem Investment Corporation,[16] we ruled
that, the process is not completed until payment of just compensation. Thus,
here, the failure of the Republic to pay respondent and his predecessors-in-
interest for a period of 57 years rendered the expropriation process
incomplete.
The Republic now argues that under Valdehueza, respondent is not entitled to
recover possession of Lot 932 but only to demand payment of its fair market
value. Of course, we are aware of the doctrine that non-payment of just
compensation (in an expropriation proceedings) does not entitle the private
landowners to recover possession of the expropriated lots. This is our ruling
in the recent cases of Republic of the Philippines vs. Court of Appeals, et al.,[17]
and Reyes vs. National Housing Authority.[18] However, the facts of the present
case do not justify its application. It bears stressing that the Republic was
ordered to pay just compensation twice, the first was in the expropriation
proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed
since then. We cannot but construe the Republics failure to pay just
compensation as a deliberate refusal on its part. Under such circumstance,
recovery of possession is in order. In several jurisdictions, the courts held that
recovery of possession may be had when property has been wrongfully taken
or is wrongfully retained by one claiming to act under the power of eminent
domain[19] or where a rightful entry is made and the party condemning
refuses to pay the compensation which has been assessed or agreed
upon;[20] or fails or refuses to have the compensation assessed and paid.[21]
The Republic also contends that where there have been constructions being
used by the military, as in this case, public interest demands that the present
suit should not be sustained.
It must be emphasized that an individual cannot be deprived of his property
for the public convenience.[22] In Association of Small Landowners in the
Philippines, Inc. vs. Secretary of Agrarian Reform,[23] we ruled:
One of the basic principles of the democratic system is that where the rights of
the individual are concerned, the end does not justify the means. It is not
enough that there be a valid objective; it is also necessary that the means
employed to pursue it be in keeping with the Constitution. Mere expediency
will not excuse constitutional shortcuts. There is no question that not even
the strongest moral conviction or the most urgent public need, subject only
to a few notable exceptions, will excuse the bypassing of an individual's
rights. It is no exaggeration to say that a person invoking a right guaranteed
under Article III of the Constitution is a majority of one even as against the
rest of the nation who would deny him that right.
The right covers the persons life, his liberty and his property under Section
1 of Article III of the Constitution. With regard to his property, the owner
enjoys the added protection of Section 9, which reaffirms the familiar rule
that private property shall not be taken for public use without just
compensation.
The Republics assertion that the defense of the State will be in grave danger if
we shall order the reversion of Lot 932 to respondent is an overstatement. First,
Lot 932 had ceased to operate as an airport. What remains in the site is just the
National Historical Institutes marking stating that Lot 932 is the former location
of Lahug Airport. And second, there are only thirteen (13) structures located on
Lot 932, eight (8) of which are residence apartments of military personnel.
Only two (2) buildings are actually used as training centers. Thus, practically
speaking, the reversion of Lot 932 to respondent will only affect a handful of
military personnel. It will not result to irreparable damage or damage beyond
pecuniary estimation, as what the Republic vehemently claims.
We thus rule that the special circumstances prevailing in this case entitle
respondent to recover possession of the expropriated lot from the Republic.
Unless this form of swift and effective relief is granted to him, the grave
injustice committed against his predecessors-in-interest, though no fault or
negligence on their part, will be perpetuated. Let this case, therefore, serve as
a wake-up call to the Republic that in the exercise of its power of eminent
domain, necessarily in derogation of private rights, it must comply with the
Constitutional limitations. This Court, as the guardian of the peoples right,
will not stand still in the face of the Republics oppressive and confiscatory
taking of private property, as in this case.
At this point, it may be argued that respondent Vicente Lim acted in bad faith
in entering into a contract of mortgage with Valdehueza and Panerio despite
the clear annotation in TCT No. 23934 that Lot 932 is subject to the priority of
the National Airports Corporation [to acquire said parcels of land] x x x
upon previous payment of a reasonable market value.
The issue of whether or not respondent acted in bad faith is immaterial
considering that the Republic did not complete the expropriation process. In
short, it failed to perfect its title over Lot 932 by its failure to pay just
compensation. The issue of bad faith would have assumed relevance if the
Republic actually acquired title over Lot 932. In such a case, even if
respondents title was registered first, it would be the Republics title or right of
ownership that shall be upheld. But now, assuming that respondent was in
bad faith, can such fact vest upon the Republic a better title over Lot 932?
We believe not. This is because in the first place, the Republic has no title to
speak of.
At any rate, assuming that respondent had indeed knowledge of the
annotation, still nothing would have prevented him from entering into a
mortgage contract involving Lot 932 while the expropriation proceeding was
pending. Any person who deals with a property subject of an expropriation
does so at his own risk, taking into account the ultimate possibility of losing
the property in favor of the government. Here, the annotation merely served
as a caveat that the Republic had a preferential right to acquire Lot 932 upon
its payment of a reasonable market value. It did not proscribe Valdehueza
and Panerio from exercising their rights of ownership including their right to
mortgage or even to dispose of their property. In Republic vs. Salem Investment
Corporation,[24] we recognized the owners absolute right over his property
pending completion of the expropriation proceeding, thus:
It is only upon the completion of these two stages that expropriation is said to
have been completed. Moreover, it is only upon payment of just compensation
that title over the property passes to the government. Therefore, until the
action for expropriation has been completed and terminated, ownership over
the property being expropriated remains with the registered owner.
Consequently, the latter can exercise all rights pertaining to an owner,
including the right to dispose of his property subject to the power of the
State ultimately to acquire it through expropriation.
It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932 to
respondent in 1964, they were still the owners thereof and their title had not
yet passed to the petitioner Republic. In fact, it never did. Such title or
ownership was rendered conclusive when we categorically ruled in
Valdehueza that: It is true that plaintiffs are still the registered owners of the
land, there not having been a transfer of said lots in favor of the
Government.
For respondents part, it is reasonable to conclude that he entered into the
contract of mortgage with Valdehueza and Panerio fully aware of the extent
of his right as a mortgagee. A mortgage is merely an accessory contract
intended to secure the performance of the principal obligation. One of its
characteristics is that it is inseparable from the property. It adheres to the
property regardless of who its owner may subsequently be.[25] Respondent
must have known that even if Lot 932 is ultimately expropriated by the
Republic, still, his right as a mortgagee is protected. In this regard, Article 2127
of the Civil Code provides:
Art. 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received when
the obligation becomes due, and to the amount of the indemnity granted or
owing to the proprietor from the insurers of the property mortgaged, or in
virtue of expropriation for public use, with the declarations, amplifications,
and limitations established by law, whether the estate remains in the
possession of the mortgagor or it passes in the hands of a third person.
In summation, while the prevailing doctrine is that the non-payment of just
compensation does not entitle the private landowner to recover possession of
the expropriated lots,[26] however, in cases where the government failed to
pay just compensation within five (5)[27] years from the finality of the
judgment in the expropriation proceedings, the owners concerned shall have
the right to recover possession of their property. This is in consonance with
the principle that the government cannot keep the property and dishonor the
judgment.[28] To be sure, the five-year period limitation will encourage the
government to pay just compensation punctually. This is in keeping with
justice and equity. After all, it is the duty of the government, whenever it takes
property from private persons against their will, to facilitate the payment of
just compensation. In Cosculluela v. Court of Appeals,[29] we defined just
compensation as not only the correct determination of the amount to be paid
to the property owner but also the payment of the property within a
reasonable time. Without prompt payment, compensation cannot be
considered just.

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV

No. 72915 is AFFIRMED in toto.

The Republics motion for reconsideration of our Resolution dated March 1,

2004 is DENIED with FINALITY. No further pleadings will be allowed.

Let an entry of judgment be made in this case.

SO ORDERED.
EN BANC CAFARO and ROSARIO LOZADA, represented by PEREZ, and
MARCIA LOZADA GODINEZ,
MENDOZA, JJ.
Respondents.
MACTAN-CEBU INTERNATIONAL AIRPORT G.R. No. 176625
AUTHORITY and AIR TRANSPORTATION OFFICE,
Promulgated:
Petitioners,
Present:

February 25, 2010

PUNO, C.J.,

CARPIO, x------------------------------------------------------------------------------------ x

CORONA,
- versus -
CARPIO MORALES, VELASCO,
JR., NACHURA,
LEONARDO-DE CASTRO,
DECISION

BRION,

PERALTA,* NACHURA, J.:

BERNARDO L. LOZADA, SR., and the
HEIRS OF ROSARIO MERCADO, namely, VICENTE
LOZADA, MARIO M. LOZADA, MARCIA L.
GODINEZ, VIRGINIA L. FLORES, BERNARDO
LOZADA, JR., DOLORES GACASAN, SOCORRO
BERSAMIN,
DEL CASTILLO,
ABAD, This is a petition for review on certiorari under Rule 45 of the Rules of
Court, seeking to reverse, annul, and set aside the Decision 91 [1] dated
VILLARAMA, JR., February 28, 2006 and the Resolution92[2] dated February 7, 2007 of the Court
of Appeals (CA) (Cebu City), Twentieth Division, in CA-G.R. CV No. 65796.

The antecedent facts and proceedings are as follows:
Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area
of 1,017 square meters, more or less, located in Lahug, Cebu City. Its original
owner was Anastacio Deiparine when the same was subject to expropriation
proceedings, initiated by the Republic of the Philippines (Republic),
represented by the then Civil Aeronautics Administration (CAA), for the
expansion and improvement of the Lahug Airport. The case was filed with the
then Court of First Instance of Cebu, Third Branch, and docketed as Civil Case
No. R-1881.
As early as 1947, the lots were already occupied by the U.S. Army.
They were turned over to the Surplus Property Commission, the Bureau of
Aeronautics, the National Airport Corporation and then to the CAA.
During the pendency of the expropriation proceedings, respondent
Bernardo L. Lozada, Sr. acquired Lot No. 88 from Deiparine. Consequently,
Transfer Certificate of Title (TCT) No. 9045 was issued in Lozadas name.
On December 29, 1961, the trial court rendered judgment in favor of
the Republic and ordered the latter to pay Lozada the fair market value of Lot
No. 88, adjudged at P3.00 per square meter, with consequential damages by
way of legal interest computed from November 16, 1947the time when the lot
was first occupied by the airport. Lozada received the amount of P3,018.00 by
way of payment.
The affected landowners appealed. Pending appeal, the Air
Transportation Office (ATO), formerly CAA, proposed a compromise
settlement whereby the owners of the lots affected by the expropriation
proceedings would either not appeal or withdraw their respective appeals in
consideration of a commitment that the expropriated lots would be resold at
the price they were expropriated in the event that the ATO would abandon
the Lahug Airport, pursuant to an established policy involving similar cases.
Because of this promise, Lozada did not pursue his appeal. Thereafter, Lot No.
88 was transferred and registered in the name of the Republic under TCT No.
25057.
The projected improvement and expansion plan of the old Lahug
Airport, however, was not pursued.
Lozada, with the other landowners, contacted then CAA Director
Vicente Rivera, Jr., requesting to repurchase the lots, as per previous
agreement. The CAA replied that there might still be a need for the Lahug
Airport to be used as an emergency DC-3 airport. It reiterated, however, the
assurance that should this Office dispose and resell the properties which may
be found to be no longer necessary as an airport, then the policy of this Office
is to give priority to the former owners subject to the approval of the President.
On November 29, 1989, then President Corazon C. Aquino issued a
Memorandum to the Department of Transportation, directing the transfer of
general aviation operations of the Lahug Airport to the Mactan International
Airport before the end of 1990 and, upon such transfer, the closure of the
Lahug Airport.
Sometime in 1990, the Congress of the Philippines passed Republic
Act (R.A.) No. 6958, entitled An Act Creating the Mactan-Cebu International
Airport Authority, Transferring Existing Assets of the Mactan International
Airport and the Lahug Airport to the Authority, Vesting the Authority with
Power to Administer and Operate the Mactan International Airport and the
Lahug Airport, and For Other Purposes.
From the date of the institution of the expropriation proceedings up
to the present, the public purpose of the said expropriation (expansion of the
airport) was never actually initiated, realized, or implemented. Instead, the
old airport was converted into a commercial complex. Lot No. 88 became the
site of a jail known as Bagong Buhay Rehabilitation Complex, while a portion
thereof was occupied by squatters.93[3] The old airport was converted into
what is now known as the Ayala I.T. Park, a commercial area.
Thus, on June 4, 1996, petitioners initiated a complaint for the recovery
of possession and reconveyance of ownership of Lot No. 88. The case was
docketed as Civil Case No. CEB-18823 and was raffled to the Regional Trial
Court (RTC), Branch 57, Cebu City. The complaint substantially alleged as
follows:
(a) Spouses Bernardo and Rosario Lozada were the
registered owners of Lot No. 88 covered by TCT No.
9045;
(b) In the early 1960s, the Republic sought to acquire by
expropriation Lot No. 88, among others, in connection
with its program for the improvement and expansion
of the Lahug Airport;
(c) A decision was rendered by the Court of First Instance
in favor of the Government and against the land
owners, among whom was Bernardo Lozada, Sr.
appealed therefrom;
(d) During the pendency of the appeal, the parties entered
into a compromise settlement to the effect that the
subject property would be resold to the original owner
at the same price when it was expropriated in the event
that the Government abandons the Lahug Airport;
(e) Title to Lot No. 88 was subsequently transferred to the
Republic of the Philippines (TCT No. 25057);
(f) The projected expansion and improvement of the
Lahug Airport did not materialize;
(g) Plaintiffs sought to repurchase their property from then
CAA Director Vicente Rivera. The latter replied by
giving as assurance that priority would be given to the
previous owners, subject to the approval of the
President, should CAA decide to dispose of the
properties;
(h) On November 29, 1989, then President Corazon C.
Aquino, through a Memorandum to the Department of
Transportation and Communications (DOTC), directed
the transfer of general aviation operations at the Lahug
Airport to the Mactan-Cebu International Airport
Authority;
(i) Since the public purpose for the expropriation no
longer exists, the property must be returned to the
plaintiffs.94[4]

In their Answer, petitioners asked for the immediate dismissal of the
complaint. They specifically denied that the Government had made
assurances to reconvey Lot No. 88 to respondents in the event that the
property would no longer be needed for airport operations. Petitioners instead
asserted that the judgment of condemnation was unconditional, and
respondents were, therefore, not entitled to recover the expropriated property
notwithstanding non-use or abandonment thereof.
After pretrial, but before trial on the merits, the parties stipulated on
the following set of facts:
(1) The lot involved is Lot No. 88-SWO-25042 of the
Banilad Estate, situated in the City of Cebu, containing
an area of One Thousand Seventeen (1,017) square
meters, more or less;
(2) The property was expropriated among several other
properties in Lahug in favor of the Republic of the
Philippines by virtue of a Decision dated December 29,
1961 of the CFI of Cebu in Civil Case No. R-1881;
(3) The public purpose for which the property was
expropriated was for the purpose of the Lahug Airport;
(4) After the expansion, the property was transferred in the
name of MCIAA; [and]
(5) On November 29, 1989, then President Corazon C.
Aquino directed the Department of Transportation and
Communication to transfer general aviation operations
of the Lahug Airport to the Mactan-Cebu International
Airport Authority and to close the Lahug Airport after
such transfer[.]95[5]
During trial, respondents presented Bernardo Lozada, Sr. as their lone
witness, while petitioners presented their own witness, Mactan-Cebu
International Airport Authority legal assistant Michael Bacarisas.
On October 22, 1999, the RTC rendered its Decision, disposing as
follows:
WHEREFORE, in the light of the foregoing, the Court
hereby renders judgment in favor of the plaintiffs, Bernardo
L. Lozada, Sr., and the heirs of Rosario Mercado, namely,
Vicente M. Lozada, Marcia L. Godinez, Virginia L. Flores,
Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L.
Cafaro and Rosario M. Lozada, represented by their attorney-
in-fact Marcia Lozada Godinez, and against defendants Cebu-
Mactan International Airport Authority (MCIAA) and Air
Transportation Office (ATO):
1. ordering MCIAA and ATO to restore to plaintiffs
the possession and ownership of their land, Lot No. 88 Psd-
821 (SWO-23803), upon payment of the expropriation price to
plaintiffs; and
2. ordering the Register of Deeds to effect the transfer
of the Certificate of Title from defendant[s] to plaintiffs on Lot
 No. [88], cancelling TCT No. 20357 in the name of defendant
MCIAA and to issue a new title on the same lot in the name
of Bernardo L. Lozada, Sr. and the heirs of Rosario Mercado,
namely: Vicente M. Lozada, Mario M. Lozada, Marcia L.
Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores
L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada.
No pronouncement as to costs.
SO ORDERED.96[6]
Aggrieved, petitioners interposed an appeal to the CA. After the filing
of the necessary appellate briefs, the CA rendered its assailed Decision dated
February 28, 2006, denying petitioners appeal and affirming in toto the
Decision of the RTC, Branch 57, Cebu City. Petitioners motion for
reconsideration was, likewise, denied in the questioned CA Resolution dated
February 7, 2007.
Hence, this petition arguing that: (1) the respondents utterly failed to
prove that there was a repurchase agreement or compromise settlement
between them and the Government; (2) the judgment in Civil Case No. R-1881
was absolute and unconditional, giving title in fee simple to the Republic; and
(3) the respondents claim of verbal assurances from government officials
violates the Statute of Frauds.
The petition should be denied.
Petitioners anchor their claim to the controverted property on the
supposition that the Decision in the pertinent expropriation proceedings did
not provide for the condition that should the intended use of Lot No. 88 for
the expansion of the Lahug Airport be aborted or abandoned, the property
would revert to respondents, being its former owners. Petitioners cite, in
support of this position, Fery v. Municipality of Cabanatuan, 97 [7] which
declared that the Government acquires only such rights in expropriated
parcels of land as may be allowed by the character of its title over the
properties
If x x x land is expropriated for a particular purpose, with the
condition that when that purpose is ended or abandoned the
property shall return to its former owner, then, of course,
when the purpose is terminated or abandoned the former
owner reacquires the property so expropriated. If x x x land is
expropriated for a public street and the expropriation is
granted upon condition that the city can only use it for a public
street, then, of course, when the city abandons its use as a
public street, it returns to the former owner, unless there is
some statutory provision to the contrary. x x x. If, upon the
contrary, however, the decree of expropriation gives to the
entity a fee simple title, then, of course, the land becomes the
absolute property of the expropriator, whether it be the State,
a province, or municipality, and in that case the non-user does
not have the effect of defeating the title acquired by the
expropriation proceedings. x x x.
When land has been acquired for public use in fee
simple, unconditionally, either by the exercise of eminent
domain or by purchase, the former owner retains no right in
the land, and the public use may be abandoned, or the land
may be devoted to a different use, without any impairment of
 the estate or title acquired, or any reversion to the former
owner. x x x.98[8]
Contrary to the stance of petitioners, this Court had ruled otherwise
in Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport
Authority,99[9] thus
Moreover, respondent MCIAA has brought to our
attention a significant and telling portion in the Decision in
Civil Case No. R-1881 validating our discernment that the
expropriation by the predecessors of respondent was ordered
under the running impression that Lahug Airport would
continue in operation
As for the public purpose of the
expropriation proceeding, it cannot now be
doubted. Although Mactan Airport is being
constructed, it does not take away the actual
usefulness and importance of the Lahug
Airport: it is handling the air traffic both
civilian and military. From it aircrafts fly to
Mindanao and Visayas and pass thru it on
their flights to the North and Manila. Then, no
evidence was adduced to show how soon is the
Mactan Airport to be placed in operation and
whether the Lahug Airport will be closed
immediately thereafter. It is up to the other
departments of the Government to
determine said matters. The Court cannot
substitute its judgment for those of the said
departments or agencies. In the absence of such
showing, the Court will presume that the Lahug
Airport will continue to be in operation (emphasis
supplied).
While in the trial in Civil Case No. R-1881 [we] could
have simply acknowledged the presence of public purpose
for the exercise of eminent domain regardless of the survival
of Lahug Airport, the trial court in its Decision chose not to do
so but instead prefixed its finding of public purpose upon its
understanding that Lahug Airport will continue to be in
operation. Verily, these meaningful statements in the body of
the Decision warrant the conclusion that the expropriated
properties would remain to be so until it was confirmed that
Lahug Airport was no longer in operation. This inference
further implies two (2) things: (a) after the Lahug Airport
ceased its undertaking as such and the expropriated lots were
not being used for any airport expansion project, the rights
vis--vis the expropriated Lots Nos. 916 and 920 as between the
State and their former owners, petitioners herein, must be
equitably adjusted; and (b) the foregoing unmistakable
declarations in the body of the Decision should merge with
and become an intrinsic part of the fallo thereof which under
the premises is clearly inadequate since the dispositive
portion is not in accord with the findings as contained in the
body thereof.100[10]
Indeed, the Decision in Civil Case No. R-1881 should be read in its
entirety, wherein it is apparent that the acquisition by the Republic of the
expropriated lots was subject to the condition that the Lahug Airport would
continue its operation. The condition not having materialized because the
airport had been abandoned, the former owner should then be allowed to
reacquire the expropriated property.101[11]
On this note, we take this opportunity to revisit our ruling in Fery,
which involved an expropriation suit commenced upon parcels of land to be
used as a site for a public market. Instead of putting up a public market,
respondent Cabanatuan constructed residential houses for lease on the area.
Claiming that the municipality lost its right to the property taken since it did
not pursue its public purpose, petitioner Juan Fery, the former owner of the
lots expropriated, sought to recover his properties. However, as he had
admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to
the lands in question, judgment was rendered in favor of the municipality,
following American jurisprudence, particularly City of Fort Wayne v. Lake Shore
& M.S. RY. Co.,102[12] McConihay v. Theodore Wright,103[13] and Reichling v.
Covington Lumber Co.,104[14] all uniformly holding that the transfer to a third
party of the expropriated real property, which necessarily resulted in the
abandonment of the particular public purpose for which the property was
taken, is not a ground for the recovery of the same by its previous owner, the
title of the expropriating agency being one of fee simple.
Obviously, Fery was not decided pursuant to our now sacredly held
constitutional right that private property shall not be taken for public use
without just compensation.105[15] It is well settled that the taking of private
property by the Governments power of eminent domain is subject to two
mandatory requirements: (1) that it is for a particular public purpose; and (2)
that just compensation be paid to the property owner. These requirements
partake of the nature of implied conditions that should be complied with to
enable the condemnor to keep the property expropriated.106[16]
More particularly, with respect to the element of public use, the
expropriator should commit to use the property pursuant to the purpose
stated in the petition for expropriation filed, failing which, it should file
another petition for the new purpose. If not, it is then incumbent upon the
expropriator to return the said property to its private owner, if the latter
desires to reacquire the same. Otherwise, the judgment of expropriation
suffers an intrinsic flaw, as it would lack one indispensable element for the
proper exercise of the power of eminent domain, namely, the particular public
purpose for which the property will be devoted. Accordingly, the private
property owner would be denied due process of law, and the judgment would
violate the property owners right to justice, fairness, and equity.
In light of these premises, we now expressly hold that the taking of
private property, consequent to the Governments exercise of its power of
eminent domain, is always subject to the condition that the property be
devoted to the specific public purpose for which it was taken. Corollarily, if
this particular purpose or intent is not initiated or not at all pursued, and is
peremptorily abandoned, then the former owners, if they so desire, may seek
the reversion of the property, subject to the return of the amount of just
compensation received. In such a case, the exercise of the power of eminent
domain has become improper for lack of the required factual
justification.107[17]
 Even without the foregoing declaration, in the instant case, on the
question of whether respondents were able to establish the existence of an oral
compromise agreement that entitled them to repurchase Lot No. 88 should the
operations of the Lahug Airport be abandoned, we rule in the affirmative.
It bears stressing that both the RTC, Branch 57, Cebu and the CA have
passed upon this factual issue and have declared, in no uncertain terms, that
a compromise agreement was, in fact, entered into between the Government
and respondents, with the former undertaking to resell Lot No. 88 to the latter
if the improvement and expansion of the Lahug Airport would not be
pursued. In affirming the factual finding of the RTC to this effect, the CA
declared
Lozadas testimony is cogent. An octogenarian
widower-retiree and a resident of Moon Park, California since
1974, he testified that government representatives verbally
promised him and his late wife while the expropriation
proceedings were on-going that the government shall return
the property if the purpose for the expropriation no longer
exists. This promise was made at the premises of the airport.
As far as he could remember, there were no expropriation
proceedings against his property in 1952 because the first
notice of expropriation he received was in 1962. Based on the
promise, he did not hire a lawyer. Lozada was firm that he
was promised that the lot would be reverted to him once the
public use of the lot ceases. He made it clear that the verbal
promise was made in Lahug with other lot owners before the
1961 decision was handed down, though he could not name
the government representatives who made the promise. It
was just a verbal promise; nevertheless, it is binding. The fact
that he could not supply the necessary details for the
establishment of his assertions during cross-examination, but
that When it will not be used as intended, it will be returned
back, we just believed in the government, does not dismantle
the credibility and truthfulness of his allegation. This Court
notes that he was 89 years old when he testified in November
1997 for an incident which happened decades ago. Still, he is
a competent witness capable of perceiving and making his
perception known. The minor lapses are immaterial. The
decision of the competency of a witness rests primarily with
the trial judge and must not be disturbed on appeal unless it
is clear that it was erroneous. The objection to his competency
must be made before he has given any testimony or as soon
as the incompetency becomes apparent. Though Lozada is not
part of the compromise agreement,108[18] he nevertheless
adduced sufficient evidence to support his claim.109[19]
As correctly found by the CA, unlike in Mactan Cebu International
Airport Authority v. Court of Appeals, 110 [20] cited by petitioners, where
respondent therein offered testimonies which were hearsay in nature, the
testimony of Lozada was based on personal knowledge as the assurance from
the government was personally made to him. His testimony on cross-
examination destroyed neither his credibility as a witness nor the truthfulness
of his words.
Verily, factual findings of the trial court, especially when affirmed by
the CA, are binding and conclusive on this Court and may not be reviewed. A
petition for certiorari under Rule 45 of the Rules of Court contemplates only
questions of law and not of fact.111[21] Not one of the exceptions to this rule
is present in this case to warrant a reversal of such findings.
As regards the position of petitioners that respondents testimonial
evidence violates the Statute of Frauds, suffice it to state that the Statute of
Frauds operates only with respect to executory contracts, and does not apply
to contracts which have been completely or partially performed, the rationale
thereof being as follows:
In executory contracts there is a wide field for fraud because
unless they be in writing there is no palpable evidence of the
intention of the contracting parties. The statute has precisely
been enacted to prevent fraud. However, if a contract has
been totally or partially performed, the exclusion of parol
evidence would promote fraud or bad faith, for it would
enable the defendant to keep the benefits already delivered
by him from the transaction in litigation, and, at the same
time, evade the obligations, responsibilities or liabilities
assumed or contracted by him thereby.112[22]
In this case, the Statute of Frauds, invoked by petitioners to bar the
claim of respondents for the reacquisition of Lot No. 88, cannot apply, the oral
compromise settlement having been partially performed. By reason of such
assurance made in their favor, respondents relied on the same by not pursuing
their appeal before the CA. Moreover, contrary to the claim of petitioners, the
fact of Lozadas eventual conformity to the appraisal of Lot No. 88 and his
seeking the correction of a clerical error in the judgment as to the true area of
Lot No. 88 do not conclusively establish that respondents absolutely parted
with their property. To our mind, these acts were simply meant to cooperate
with the government, particularly because of the oral promise made to them.
The right of respondents to repurchase Lot No. 88 may be enforced
based on a constructive trust constituted on the property held by the
government in favor of the former. On this note, our ruling in Heirs of Timoteo
Moreno is instructive, viz.:
Mactan-Cebu International Airport Authority is correct
in stating that one would not find an express statement in the
Decision in Civil Case No. R-1881 to the effect that the
[condemned] lot would return to [the landowner] or that [the
landowner] had a right to repurchase the same if the purpose for
which it was expropriated is ended or abandoned or if the property
was to be used other than as the Lahug Airport. This omission
notwithstanding, and while the inclusion of this
pronouncement in the judgment of condemnation would
have been ideal, such precision is not absolutely necessary nor
is it fatal to the cause of petitioners herein. No doubt, the
return or repurchase of the condemned properties of
petitioners could be readily justified as the manifest legal
effect or consequence of the trial courts underlying
presumption that Lahug Airport will continue to be in operation
when it granted the complaint for eminent domain and the
airport discontinued its activities.
The predicament of petitioners involves a
constructive trust, one that is akin to the implied trust referred
to in Art. 1454 of the Civil Code, If an absolute conveyance of
property is made in order to secure the performance of an obligation
of the grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the
grantor when it becomes due, he may demand the reconveyance of
the property to him. In the case at bar, petitioners conveyed Lots
No. 916 and 920 to the government with the latter obliging
itself to use the realties for the expansion of Lahug Airport;
failing to keep its bargain, the government can be compelled
by petitioners to reconvey the parcels of land to them,
otherwise, petitioners would be denied the use of their
properties upon a state of affairs that was not conceived nor
contemplated when the expropriation was authorized.
Although the symmetry between the instant case and
the situation contemplated by Art. 1454 is not perfect, the
provision is undoubtedly applicable. For, as explained by an
expert on the law of trusts: The only problem of great importance
in the field of constructive trust is to decide whether in the numerous
and varying fact situations presented to the courts there is a
wrongful holding of property and hence a threatened unjust
enrichment of the defendant. Constructive trusts are fictions of
equity which are bound by no unyielding formula when they
are used by courts as devices to remedy any situation in
which the holder of legal title may not in good conscience
retain the beneficial interest.
In constructive trusts, the arrangement is temporary
and passive in which the trustees sole duty is to transfer the
title and possession over the property to the plaintiff-
beneficiary. Of course, the wronged party seeking the aid of a
court of equity in establishing a constructive trust must himself do
equity. Accordingly, the court will exercise its discretion in
deciding what acts are required of the plaintiff-beneficiary as
conditions precedent to obtaining such decree and has the
obligation to reimburse the trustee the consideration received
from the latter just as the plaintiff-beneficiary would if he
proceeded on the theory of rescission. In the good judgment
of the court, the trustee may also be paid the necessary
expenses he may have incurred in sustaining the property, his
fixed costs for improvements thereon, and the monetary
value of his services in managing the property to the extent
that plaintiff-beneficiary will secure a benefit from his acts.
The rights and obligations between the constructive
trustee and the beneficiary, in this case, respondent MCIAA
and petitioners over Lots Nos. 916 and 920, are echoed in Art.
1190 of the Civil Code, When the conditions have for their purpose
the extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what they
have received x x x In case of the loss, deterioration or improvement
of the thing, the provisions which, with respect to the debtor, are laid
down in the preceding article shall be applied to the party who is
bound to return x x x.113[23]
On the matter of the repurchase price, while petitioners are obliged to
reconvey Lot No. 88 to respondents, the latter must return to the former what
they received as just compensation for the expropriation of the property, plus
legal interest to be computed from default, which in this case runs from the
time petitioners comply with their obligation to respondents.
Respondents must likewise pay petitioners the necessary expenses
they may have incurred in maintaining Lot No. 88, as well as the monetary
value of their services in managing it to the extent that respondents were
benefited thereby.
Following Article 1187114[24] of the Civil Code, petitioners may keep
whatever income or fruits they may have obtained from Lot No. 88, and
respondents need not account for the interests that the amounts they received 3. Petitioners are ENTITLED to keep whatever fruits and income they
as just compensation may have earned in the meantime. may have obtained from Lot No. 88; and

In accordance with Article 1190 115 [25] of the Civil Code vis--vis
Article 1189, which provides that (i)f a thing is improved by its nature, or by
time, the improvement shall inure to the benefit of the creditor x x x,
respondents, as creditors, do not have to pay, as part of the process of
restitution, the appreciation in value of Lot No. 88, which is a natural
consequence of nature and time.116[26]
4. Respondents are also ENTITLED to keep whatever interests the
amounts they received as just compensation may have earned in the
meantime, as well as the appreciation in value of Lot No. 88, which is a natural
consequence of nature and time;

In light of the foregoing modifications, the case is REMANDED to the

WHEREFORE, the petition is DENIED. The February 28, 2006
Decision of the Court of Appeals, affirming the October 22, 1999 Decision of
the Regional Trial Court, Branch 87, Cebu City, and its February 7, 2007
Resolution are AFFIRMED with MODIFICATION as follows:
Regional Trial Court, Branch 57, Cebu City, only for the purpose of receiving
evidence on the amounts that respondents will have to pay petitioners in
accordance with this Courts decision. No costs.

SO ORDERED.

1. Respondents are ORDERED to return to petitioners the just

compensation they received for the expropriation of Lot No. 88, plus legal
interest, in the case of default, to be computed from the time petitioners
comply with their obligation to reconvey Lot No. 88 to them;

2. Respondents are ORDERED to pay petitioners the necessary

expenses the latter incurred in maintaining Lot No. 88, plus the monetary
value of their services to the extent that respondents were benefited thereby;
Republic of the Philippines and spouses Misericordia Gutierrez and Ricardo Malit covered by tax
SUPREME COURT declarations Nos. 907, 4281 and 7582, respectively.
Manila
Plaintiff initiated negotiations for the acquisition of right of way
THIRD DIVISION easements over the aforementioned lots for the construction of its
transmission lines but unsuccessful in this regard, said corporation
G.R. No. L-60077 January 18, 1991 was constrained to file eminent domain proceedings against the
herein defendants on January 20, 1965.
NATIONAL POWER CORPORATION, petitioner,
vs. Upon filing of the corresponding complaint, plaintiff corporation
SPS. MISERICORDIA GUTIERREZ and RICARDO MALIT and THE deposited the amount of P973.00 with the Provincial Treasurer of
HONORABLE COURT OF APPEALS, respondents. Pampanga, tendered to cover the provisional value of the land of the
defendant spouses Ricardo Malit and Misericordia Gutierrez. And by
Pedro S. Dabu for private respondents. virtue of which, the plaintiff corporation was placed in possession of
the property of the defendant spouses so it could immediately
proceed with the construction of its Mexico-Limay 230 KV
transmission line. In this connection, by the trial court's order of
BIDIN, J.: September 30, 1965, the defendant spouses were authorized to
withdraw the fixed provisional value of their land in the sum of
This is a petition for review on certiorari filed by the National Power P973.00.
Corporation (NPC) seeking the reversal or modification of the March 9, 1986
Decision of the Court of Appeals in CA G.R. No. 54291-R entitled "National The only controversy existing between the parties litigants is the
Power Corporation v. Sps. Misericordia Gutierrez and Ricardo Malit", reasonableness and adequacy of the disturbance or compensation fee
affirming the December 4, 1972 Decision of the then Court of First Instance of of the expropriated properties.
Pampanga, Fifth Judicial District, Branch II, in Civil Case No. 2709, entitled
National Power Corporation v. Matias Cruz, et al. Meanwhile, for the purpose of determining the fair and just
compensation due the defendants, the court appointed three
The undisputed facts of the case, as found by the Court of Appeals, are as commissioners, comprised of one representative of the plaintiff, one
follows: for the defendants and the other from the court, who then were
empowered to receive evidence, conduct ocular inspection of the
Plaintiff National Power Corporation, a government owned and premises, and thereafter, prepare their appraisals as to the fair and just
controlled entity, in accordance with Commonwealth Act No. 120, is compensation to be paid to the owners of the lots. Hearings were
invested with the power of eminent domain for the purpose of consequently held before said commissioners and during their
pursuing its objectives, which among others is the construction, hearings, the case of defendant Heirs of Natalia Paule was amicably
operation, and maintenance of electric transmission lines for settled by virtue of a Right of Way Grant (Exh. C) executed by
distribution throughout the Philippines. For the construction of its 230 Guadalupe Sangalang for herself and in behalf of her co-heirs in favor
KV Mexico-Limay transmission lines, plaintiff's lines have to pass the of the plaintiff corporation. The case against Matias Cruz was earlier
lands belonging to defendants Matias Cruz, Heirs of Natalia Paule
decided by the court, thereby leaving only the case against the
defendant spouses Ricardo Malit and Misericordia Gutierrez still to
be resolved. Accordingly, the commissioners submitted their
individual reports. The commissioner for the plaintiff corporation
recommended the following:
. . . that plaintiff be granted right of way easement over the
760 square meters of the defendants Malit and Gutierrez land
for plaintiff transmission line upon payment of an easement
fee of P1.00 therefor. . . . (Annex M)
The commissioner for the defendant spouses recommended the
following:
. . . that Mr. and Mrs. Ricardo Malit be paid as disturbance
compensation the amount of P10.00 sq. meter or the total
amount of P7,600.00' (Annex K)
The Court's commissioner recommended the following:
. . . the payment of Five (P 5.OO) Pesos per square meter of
the area covered by the Right-of-way to be granted, . . .(Annex
L)
The plaintiff corporation urged the Court that the assessment
as recommended by their commissioner be the one adopted.
Defendant spouses, however, dissented and objected to the
price recommended by both the representative of the court
and of the plaintiff corporation.
With these reports submitted by the three commissioners and
on the evidence adduced by the defendants as well as the
plaintiff for the purpose of proving the fair market value of
the property sought to be expropriated, the lower court
rendered a decision the dispositive portion of which reads as
follows:
WHEREFORE, responsive to the foregoing
considerations, judgment is hereby rendered
ordering plaintiff National Power Corporation to pay
defendant spouses Ricardo Malit and Misericordia
Gutierrez the sum of P10.00 per square meter as the
fair and reasonable compensation for the right-of-
way easement of the affected area, which is 760
squares, or a total sum of P7,600.00 and P800.00 as
attorney's fees' (Record on Appeal, p. 83)
Dissatisfied with the decision, the plaintiff corporation filed a
motion for reconsideration which was favorably acted upon
by the lower court, and in an order dated June 10, 1973, it
amended its previous decision in the following tenor:
On the basis of an ocular inspection made personally
by the undersigned, this court finally classified the
land of the spouses Ricardo Malit and Misericordia to
be partly commercial and partly agricultural, for
which reason the amount of P10.00 per sq. meter
awarded in the decision of December 4,1972 is hereby
reduced to P5.00 per square meter as the fair and
reasonable market value of the 760 square meters
belonging to the said spouses.
There being no claim and evidence for attorney's fees,
the amount of P800.00 awarded as attorney's fees, in
the decision of December 4, 1972 is hereby
reconsidered and set aside. (Annex S)
Still not satisfied, an appeal was filed by petitioner (NPC)
with the Court of Appeals but respondent Court of Appeals
in its March 9, 1982, sustained the trial court, as follows:
WHEREFORE, finding no reversible error committed
by the court a quo, the appealed judgment is hereby
affirmed with costs against the plaintiff-appellant.
 Hence, the instant petition.
The First Division of this Court gave due course to the petition and required
both parties to submit their respective memoranda (Resolution of January 12,
1983). It also noted in an internal resolution of August 17, 1983 that petitioner
flied its memorandum while the respondents failed to file their memorandum
within the period which expired on February 24,1983; hence, the case was
considered submitted for decision.
The sole issue raised by petitioner is
WHETHER PETITIONER SHOULD BE MADE TO PAY SIMPLE
EASEMENT FEE OR FULL COMPENSATION FOR THE LAND
TRAVERSED BY ITS TRANSMISSION LINES.
It is the contention of petitioner that the Court of Appeals committed gross
error by adjudging the petitioner liable for the payment of the full market
value of the land traversed by its transmission lines, and that it overlooks the
undeniable fact that a simple right-of-way easement (for the passage of
transmission lines) transmits no rights, except that of the easement. Full
ownership is retained by the private respondents and they are not totally
deprived of the use of the land. They can continue planting the same
agricultural crops, except those that would result in contact with the wires. On
this premise, petitioner submits that if full market value is required, then full
transfer of ownership is only the logical equivalent.
The petition is devoid of merit. The resolution of this case hinges on the
determination of whether the acquisition of a mere right-of-way is an exercise
of the power of eminent domain contemplated by law.1wphi1
The trial court's observation shared by the appellate court show that ". . . While
it is true that plaintiff are (sic) only after a right-of-way easement, it
nevertheless perpetually deprives defendants of their proprietary rights as
manifested by the imposition by the plaintiff upon defendants that below said
transmission lines no plant higher than three (3) meters is allowed.
Furthermore, because of the high-tension current conveyed through said
transmission lines, danger to life and limbs that may be caused beneath said
wires cannot altogether be discounted, and to cap it all plaintiff only pays the
fee to defendants once, while the latter shall continually pay the taxes due on
said affected portion of their property."
The foregoing facts considered, the acquisition of the right-of-way easement
falls within the purview of the power of eminent domain. Such conclusion
finds support in similar cases of easement of right-of-way where the Supreme
Court sustained the award of just compensation for private property
condemned for public use (See National Power Corporation vs. Court of
Appeals, 129 SCRA 665, 1984; Garcia vs. Court of Appeals, 102 SCRA
597,1981). The Supreme Court, in Republic of the Philippines vs. PLDT, * thus held
that:
Normally, of course, the power of eminent domain results in the
taking or appropriation of title to, and possession of, the expropriated
property; but no cogent reason appears why said power may not be
availed of to impose only a burden upon the owner of condemned
property, without loss of title and possession. It is unquestionable that
real property may, through expropriation, be subjected to an
easement of right-of-way.
In the case at bar, the easement of right-of-way is definitely a taking under the
power of eminent domain. Considering the nature and effect of the installation
of the 230 KV Mexico-Limay transmission lines, the limitation imposed by
NPC against the use of the land for an indefinite period deprives private
respondents of its ordinary use.
For these reasons, the owner of the property expropriated is entitled to a just
compensation, which should be neither more nor less, whenever it is possible
to make the assessment, than the money equivalent of said property. Just
compensation has always been understood to be the just and complete equivalent of
the loss which the owner of the thing expropriated has to suffer by reason of the
expropriation (Province of Tayabas vs. Perez, 66 Phil. 467 [1938]; Assoc. of Small
Land Owners of the Phils., Inc. vs. Secretary of Agrarian Reform, G.R. No.
78742; Acuna vs. Arroyo, G.R. No. 79310; Pabrico vs. Juico, G.R. No. 79744;
Manaay v. Juico, G.R. No. 79777,14 July 1989, 175 SCRA 343 [1989]). The price
or value of the land and its character at the time it was taken by the
Government are the criteria for determining just compensation (National
Power Corp. v. Court of Appeals, 129 SCRA 665, [1984]). The above price
refers to the market value of the land which may be the full market value
thereof. According to private respondents, the market value of their lot is
P50.00 per square meter because the said lot is adjacent to the National and
super highways of Gapan, Nueva Ecija and Olongapo City.

Private respondents recognize the inherent power of eminent domain being

exercised by NPC when it finally consented to the expropriation of the said
portion of their land, subject however to payment of just compensation. No
matter how laudable NPC's purpose is, for which expropriation was sought,
it is just and equitable that they be compensated the fair and full equivalent
for the loss sustained, which is the measure of the indemnity, not whatever
gain would accrue to the expropriating entity (EPZA v. Dulay, 149 SCRA 305
[1987]; Mun. of Daet v. Court of Appeals, 93 SCRA 503 (1979]).

It appearing that the trial court did not act capriciously and arbitrarily in
setting the price of P5.00 per square meter of the affected property, the said
award is proper and not unreasonable.

On the issue of ownership being claimed by petitioner in the event that the
price of P5.00 per square meter be sustained, it is well settled that an issue
which has not been raised in the Court a quo cannot be raised for the first time
on appeal as it would be offensive to the basic rules of fair play, justice and
due process . . . (Filipino Merchants v. Court of Appeals, G.R. No. 85141,
November 8, 1989, 179 SCRA 638; Commissioner of Internal Revenue v.
Procter and Gamble Philippines Manufacturing Corporation, 160 SCRA 560
[1988]; Commissioner of Internal Revenue v. Wander Philippines, Inc., 160
SCRA 573 1988]). Petitioner only sought an easement of right-of-way, and as
earlier discussed, the power of eminent domain may be exercised although
title was not transferred to the expropriator.

WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
SECOND DIVISION
G.R. No. 186069 : January 30, 2013
SPOUSES JESUS L. CABAHUG AND CORONACION M. CABAHUG,
Petitioners, v. NATIONAL POWER CORPORATION, Respondent.
DECISION
PEREZ, J.:
This Rule 45 Petition for Review on Certiorari seeks the reversal of (a) the 16
May 2007 Decision1 rendered by the Eighteenth Division of the Court of
Appeals (CA) in CA-G.R. CV No. 67331 which reversed the 14 March 2000
Decision rendered by the Regional Trial Court (RTC), Branch 17, Palompon,
Leyte, in Civil Case No. PN-0213 and ordered the dismissal of the complaint
for just compensation tiled by petitioners Spouses Jesus L. Cabahug and
Coronacion M. Cabahug (Spouses Cabahug) against respondent National
Power Corporation (NPC);2 and (b) the CA's Resolution dated 9 January 2009,
denying the motion for reconsideration of the 16 May 2007 Decision for lack
of merit.3?r?l1
The facts are not in dispute.
The Spouses Cabahug are the owners of two parcels of land situated in
Barangay Capokpok, Tabango, Leyte, registered in their names under Transfer
Certificate of Title (TCT) Nos. T-9813 and T-1599 of the Leyte provincial
registry.4 They were among the defendants in Special Civil
Action No. 0019-PN, a suit for expropriation earlier filed by NPC before the
RTC, in connection with its Leyte-Cebu Interconnection Project. The suit was
later dismissed when NPC opted to settle with the landowners by paying an
easement fee equivalent to 10% of value of their property in accordance with
Section 3-A of Republic Act (RA) No. 6395.5 In view of the conflicting land
values presented by the affected landowners, it appears that the Leyte
Provincial Appraisal Committee, upon request of NPC, fixed the valuation of
the affected properties at P45.00 per square meter.6?r?l1
On 9 November 1996, Jesus Cabahug executed two documents denominated
as Right of Way Grant in favor of NPC. For and in consideration of the
easement fees in the sums of P112,225.50 and P21,375.00, Jesus Cabahug
granted NPC a continuous easement of right of way for the latters
transmissions lines and their appurtenances over 24,939 and 4,750 square
meters of the parcels of land covered by TCT Nos. T-9813 and T-1599,
respectively. By said grant, Jesus Cabahug agreed not to construct any
building or structure whatsoever, nor plant in any area within the Right of
Way that will adversely affect or obstruct the transmission line of NPC, except
agricultural crops, the growth of which will not exceed three meters high.
Under paragraph 4 of the grant, however, Jesus Cabahug reserved the option
to seek additional compensation for easement fee, based on the Supreme
Courts 18 January 1991 Decision in G.R. No. 60077, entitled National Power
Corporation v. Spouses Misericordia Gutierrez and Ricardo Malit, et al.
(Gutierrez).7?r?l1
On 21 September 1998, the Spouses Cabahug filed the complaint for the
payment of just compensation, damages and attorneys fees against NPC
which was docketed as Civil Case No. PN-0213 before the RTC. Claiming to
have been totally deprived of the use of the portions of land covered by TCT
Nos. T-9813 and T-1599, the Spouses Cabahug alleged, among other matters,
that in accordance with the reservation provided under paragraph 4 of the
aforesaid grant, they have demanded from NPC payment of the balance of the
just compensation for the subject properties which, based on the valuation
fixed by the Leyte Provincial Appraisal Committee, amounted to
P1,202,404.50.8 In its answer, on the other hand, NPC averred that it already
paid the full easement fee mandated under Section 3-A of RA 6395 and that
the reservation in the grant referred to additional compensation for easement
fee, not the full just compensation sought by the Spouses Cabahug.9?r?l1
Acting on the motion for judgment on the pleadings that was filed by the
Spouses Cabahug, the RTC went on to render a Decision dated 14 March 2000.
Brushing aside NPCs reliance on Section 3-A of RA 6395, the RTC applied the
ruling handed down by this Court in Gutierrez to the effect that NPCs
easement of right of way which indefinitely deprives the owner of their
proprietary rights over their property falls within the purview of the power of
eminent domain.10 As a consequence, the RTC disposed of the complaint in
the following wise:cralawlibrary
WHEREFORE, premises considered, judgment is hereby rendered for the
Spouses Cabahug and against NPC, ordering NPC:cralawlibrary
1. To pay the Spouses Cabahug the sum of ONE MILLION THREE
HUNDRED THIRTY SIX THOUSAND and FIVE PESOS (P1,336,005.00)
together with the legal rate of interest thereon per annum reckoned from
January 3, 1997 less the amount previously paid by NPC to the Spouses
Cabahug for easement fee only;
2. To pay the Spouses Cabahug the sum equivalent to FIVE (5%) PERCENT of
the amount mentioned in the next preceding paragraph for attorneys fees; and
3. To pay the Spouses Cabahug the sum of TWENTY THOUSAND
(P20,000.00) PESOS for actual damages and litigation expenses plus costs of
the proceedings. ???r?bl? ??r??l l?? l?br?r
SO ORDERED.11?r?l1
Aggrieved by the foregoing decision, the NPC perfected the appeal which was
docketed as CA-G.R. CV No. 67331 before the CA which, on 16 May 2007,
rendered the herein assailed decision, reversing and setting aside the RTCs
appealed decision. Finding that the facts of a case are different from those
obtaining in Gutierrez and that Section 3-A of RA 6395 only allows NPC to
acquire an easement of right of way over properties traversed by its
transmission lines,12 the CA succinctly ruled as follows:cralawlibrary
Unfortunately, the Spouses Cabahug had already accepted the payment of
easement fee, pursuant to R.A. 6395, as amended, way back in 1996. Therefore,
NPCs easement of right of way has for all legal intents and purposes, been
established as far back as 1996. Since vested right has already accrued in favor
of NPC, to allow the Spouses Cabahug to pursue this case when the easement
of right of way had already been consummated would be in violation of the
contract. The contracting parties, the Spouses Cabahug and NPC had already
conformed with the terms and conditions of the agreement. To allow the
Spouses Cabahug to again collect from NPC payment of just compensation
would amount to unjust enrichment at the expense of NPC and would
sanction violation of the parties contract, which the Spouses Cabahug cannot
do in the case at bench. Further, the award of attorneys fees and litigation
expenses and the costs of suit in favor of the Spouses Cabahug cannot be
justified in the case at bar since it appears that the complaint actually has no
legal basis.13?r?l1
The Spouses Cabahugs motion for reconsideration of the 16 May 2007
Decision14 was denied for lack of merit in the CAs Resolution dated 9 January
2009. Hence, this petition for review on certiorari. 15 In urging the reversal of
the CAs assailed Decision and Resolution, the Spouses Cabahug argue that the
CA erred: (a) in disregarding paragraph 4 of the Grant of Right of Way
whereby Jesus Cabahug reserved the right to seek additional compensation
for easement fee; and (b) in not applying this Courts ruling in Gutierrez case. 16
In representation of NPC, on the other hand, the Office of the Solicitor General
(OSG) argues that the sums paid in 1996 by way of easement fees represent
the full amount allowed by law and agreed upon by the parties. Considering
that Gutierrez concerned the payment of just compensation for property
expropriated by the NPC, the OSG maintains the CA did not err in according
scant consideration to the Spouses Cabahugs invocation of the ruling in said
case.17?r?l1
We find the petition impressed with merit.
The CA regarded the Grant of Right of Way executed by Jesus Cabahug in
favor of NPC as a valid and binding contract between the parties, a fact
affirmed by the OSG in its 8 October 2009 Comment to the petition at bench. 18
Given that the parties have already agreed on the easement fee for the portions
of the subject parcels traversed by NPCs transmissions lines, the CA ruled that
the Spouses Cabahugs attempt to collect further sums by way of additional
easement fee and/or just compensation is violative of said contract and
tantamount to unjust enrichment at the expense of NPC. As correctly pointed
out by the Spouses Cabahug, however, the CAs ruling totally disregards the
fourth paragraph of the Grant executed by Jesus Cabahug which expressly
states as follows:cralawlibrary
That I hereby reserve the option to seek additional compensation for Easement
Fee, based on the Supreme Court Decision in G.R. No. 60077, promulgated on
January 18, 1991, which jurisprudence is designated as "NPC v. Gutierrez"
case.19?r?l1
From the foregoing reservation, it is evident that the Spouses Cabahugs receipt
of the easement fee did not bar them from seeking further compensation from
NPC. Even by the basic rules in the interpretation of contracts, we find that
the CA erred in holding that the payment of additional sums to the Spouses
Cabahug would be violative of the parties contract and amount to unjust
enrichment. Indeed, the rule is settled that a contract constitutes the law
between the parties who are bound by its stipulations20 which, when couched
in clear and plain language, should be applied according to their literal tenor.21
Courts cannot supply material stipulations, read into the contract words it
does not contain22 or, for that matter, read into it any other intention that
would contradict its plain import.23 Neither can they rewrite contracts because
they operate harshly or inequitably as to one of the parties, or alter them for
the benefit of one party and to the detriment of the other, or by construction,
relieve one of the parties from the terms which he voluntarily consented to, or
impose on him those which he did not.24?r?l1
Considering that Gutierrez was specifically made the point of reference for
Jesus Cabahugs reservation to seek further compensation from NPC, we find
that the CA likewise erred in finding that the ruling in said case does not apply
to the case at bench. Concededly, the NPC was constrained to file an
expropriation complaint in Gutierrez due to the failure of the negotiations for
its acquisition of an easement of right of way for its transmission lines. The
issue that was eventually presented for this Courts resolution, however, was
the propriety of making NPC liable for the payment of the full market value
of the affected property despite the fact that transfer of title thereto was not
required by said easement. In upholding the landowners right to full just
compensation, the Court ruled that the power of eminent domain may be
exercised although title is not transferred to the expropriator in an easement
of right of way. Just compensation which should be neither more nor less than
the money equivalent of the property is, moreover, due where the nature and
effect of the easement is to impose limitations against the use of the land for
an indefinite period and deprive the landowner its ordinary use.
Even without the reservation made by Jesus Cabahug in the Grant of Right of
Way, the application of Gutierrez to this case is not improper as NPC
represents it to be. Where the right of way easement, as in this case, similarly
involves transmission lines which not only endangers life and limb but
restricts as well the owner's use of the land traversed thereby, the ruling in
Gutierrez remains doctrinal and should be applied.25 It has been ruled that the
owner should be compensated for the monetary equivalent of the land if, as
here, the easement is intended to perpetually or indefinitely deprive the owner
of his proprietary rights through the imposition of conditions that affect the
ordinary use, free enjoyment and disposal of the property or through
restrictions and limitations that are inconsistent with the exercise of the
attributes of ownership, or when the introduction of structures or objects
which, by their nature, create or increase the probability of injury, death upon
or destruction of life and property found on the land is necessary.26 Measured
not by the takers gain but the owners loss, just compensation is defined as the
full and fair equivalent of the property taken from its owner by the
expropriator.27?r?l1
Too, the CA reversibly erred in sustaining NPCs reliance on Section 3-A of RA
6395 which states that only 10% of the market value of the property is due to
the owner of the property subject to an easement of right of way. Since said
easement falls within the purview of the power of eminent domain, NPCs
utilization of said provision has been repeatedly struck down by this Court in
a number of cases.28 The determination of just compensation in eminent
domain proceedings is a judicial function and no statute, decree, or executive
order can mandate that its own determination shall prevail over the court's
findings.29 Any valuation for just compensation laid down in the statutes may
serve only as a guiding principle or one of the factors in determining just
compensation, but it may not substitute the court's own judgment as to what
amount should be awarded and how to arrive at such amount. 30 Hence,
Section 3A of R.A. No. 6395, as amended, is not binding upon this Court.31?r?l1
In this case, the Leyte Provincial Appraisal Committee fixed the valuation of
the affected properties at P45.00 per square meter at the instance of NPC.
Considering that the installation of the latters transmission lines amounted to
the taking of 24,939 and 4,750 square meters from the parcels of land covered
by TCT Nos. T-9813 and T-1599 or a total of 29,689 square meters, the RTC
correctly determined that the Spouses Cabahug are entitled to P1,336,005.00
(29,689 x P45.00) by way of just compensation for their properties. Inasmuch
as NPC had already paid the sums of P112,225.50 and P21,375.00 as easement
fee, the sum of P133,600.50 should be deducted from P1,336,005.00 for a
remaining balance of P1,202,404.50. To this latter sum, the RTC also correctly
imposed legal interest since the Spouses Cabahug, as landowners, are entitled
to the payment of legal interest on the compensation for the subject lands from
the time of the taking of their possession up to the time that full payment is
made by petitioner. In accordance with jurisprudence, the legal interest
allowed in payment of just compensation for lands expropriated for public use
is six percent (6%) per annum.32?r?l1

For want of a statement of the rationale for the award in the body of the RTCs
14 March 2000 Decision, we are constrained, however, to disallow the grant of
attorneys fees in favor of the Spouses Cabahug in an amount equivalent to 5%
of the just compensation due as well as the legal interest thereon. Considered
the exception rather than the general rule, the award of attorneys fees is not
due every time a party prevails in a suit because of the policy that no premium
should be set on the right to litigate.33 The RTC's award of litigation expenses
should likewise be deleted since, like attorney's fees, the award thereof
requires that the reasons or grounds therefor must be set forth in the decision
of the court.34 This is particularly true in this case where the litigation expenses
awarded were alternatively categorized by the RTC as actual damages which,
by jurisprudence, should be pleaded and adequately proved. Time and again,
it has been ruled that the fact and amount of actual damages cannot be based
on speculation, conjecture or guess work, but must depend on actual
proof.35?r?l1

WHEREFORE, premises considered, the petition is GRANTED and the CA's

assailed 16 May 2007 Decision and 9 January 2009 Resolution are, accordingly,
REVERSED and SET ASIDE. In lieu thereof, another is entered REINSTATING
the RTC's 14 March 2000 Decision, subject to the MODIFICATION that the
awards of attorney's fees, actual damages and/or litigation expenses are
DELETED.

SO ORDERED.
FIRST DIVISION MARUHOM, ACMAD G.

MARUHOM, SOLAYMAN G. June 29, 2007

MARUHOM, MOHAMAD M.

NATIONAL POWER G.R. No. 168732 IBRAHIM, and CAIRONESA M.

CORPORATION, IBRAHIM,

Petitioner, Respondents.

Present: X----------------------------------------------------------------------------------------X

-versus- DECISION

LUCMAN G. IBRAHIM, OMAR PUNO, C.J., Chairperson, AZCUNA, J.:

G. MARUHOM, ELIAS G. SANDOVAL-GUTIERREZ,*

MARUHOM, BUCAY G. CORONA, This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul the Decision117[1] dated June 8, 2005 rendered by the
MARUHOM, FAROUK G. AZCUNA, and Court of Appeals (CA) in C.A.-G.R. CV No. 57792.

MARUHOM, HIDJARA G. GARCIA, JJ. The facts are as follows:

MARUHOM, ROCANIA G.

MARUHOM, POTRISAM G. On November 23, 1994, respondent Lucman G. Ibrahim, in his

personal capacity and in behalf of his co-heirs Omar G. Maruhom, Elias G.
MARUHOM, LUMBA G. Promulgated: Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom,
Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba
MARUHOM, SINAB G. G. Maruhom, Sinab G. Maruhom, Acmad G. Maruhom, Solayman G.
Maruhom, Mohamad M. Ibrahim and Caironesa M. Ibrahim, instituted an
action against petitioner National Power Corporation (NAPOCOR) for
recovery of possession of land and damages before the Regional Trial Court
(RTC) of Lanao del Sur.
In their complaint, Ibrahim and his co-heirs claimed that they were
owners of several parcels of land described in Survey Plan FP (VII-5) 2278
consisting of 70,000 square meters, divided into three (3) lots, i.e. Lots 1, 2, and
3 consisting of 31,894, 14,915, and 23,191 square meters each respectively.
Sometime in 1978, NAPOCOR, through alleged stealth and without
respondents knowledge and prior consent, took possession of the sub-terrain
area of their lands and constructed therein underground tunnels. The
existence of the tunnels was only discovered sometime in July 1992 by
respondents and then later confirmed on November 13, 1992 by NAPOCOR
itself through a memorandum issued by the latters Acting Assistant Project
Manager. The tunnels were apparently being used by NAPOCOR in
siphoning the water of Lake Lanao and in the operation of NAPOCORs Agus
II, III, IV, V, VI, VII projects located in Saguiran, Lanao del Sur; Nangca and
Balo-i in Lanao del Norte; and Ditucalan and Fuentes in Iligan City.
On September 19, 1992, respondent Omar G. Maruhom requested the
Marawi City Water District for a permit to construct and/or install a
motorized deep well in Lot 3 located in Saduc, Marawi City but his request
was turned down because the construction of the deep well would cause
danger to lives and property. On October 7, 1992, respondents demanded that
NAPOCOR pay damages and vacate the sub-terrain portion of their lands but
the latter refused to vacate much less pay damages. Respondents further
averred that the construction of the underground tunnels has endangered
their lives and properties as Marawi City lies in an area of local volcanic and
tectonic activity. Further, these illegally constructed tunnels caused them
sleepless nights, serious anxiety and shock thereby entitling them to recover
moral damages and that by way of example for the public good, NAPOCOR
must be held liable for exemplary damages.
Disputing respondents claim, NAPOCOR filed an answer with
counterclaim denying the material allegations of the complaint and
interposing affirmative and special defenses, namely that (1) there is a failure
to state a cause of action since respondents seek possession of the sub-terrain
portion when they were never in possession of the same, (2) respondents have
no cause of action because they failed to show proof that they were the owners
of the property, and (3) the tunnels are a government project for the benefit of
all and all private lands are subject to such easement as may be necessary for
the same.118[2]
On August 7, 1996, the RTC rendered a Decision, the decretal portion
of which reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Denying plaintiffs [private respondents]
prayer for defendant [petitioner] National Power Corporation
to dismantle the underground tunnels constructed between
the lands of plaintiffs in Lots 1, 2, and 3 of Survey Plan FP
(VII-5) 2278;
2. Ordering defendant to pay to plaintiffs
the fair market value of said 70,000 square meters of land
covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-
5) 2278 less the area of 21,995 square meters at P1,000.00 per
square meter or a total of P48,005,000.00 for the remaining
unpaid portion of 48,005 square meters; with 6% interest per
annum from the filing of this case until paid;
 3. Ordering defendant to pay plaintiffs a
reasonable monthly rental of P0.68 per square meter of the
total area of 48,005 square meters effective from its occupancy
of the foregoing area in 1978 or a total of P7,050,974.40.
4. Ordering defendant to pay plaintiffs the
sum of P200,000.00 as moral damages; and
5. Ordering defendant to pay the further
sum of P200,000.00 as attorneys fees and the costs.
SO ORDERED.119[3]
On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion
for Execution of Judgment Pending Appeal. On the other hand, NAPOCOR
filed a Notice of Appeal by registered mail on August 19, 1996. Thereafter,
NAPOCOR filed a vigorous opposition to the motion for execution of
judgment pending appeal with a motion for reconsideration of the Decision
which it had received on August 9, 1996.
On August 26, 1996, NAPOCOR filed a Manifestation and Motion
withdrawing its Notice of Appeal purposely to give way to the hearing of its
motion for reconsideration.
On August 28, 1996, the RTC issued an Order granting execution
pending appeal and denying NAPOCORs motion for reconsideration, which
Order was received by NAPOCOR on September 6, 1996.
On September 9, 1996, NAPOCOR filed its Notice of Appeal by
registered mail which was denied by the RTC on the ground of having been
filed out of time. Meanwhile, the Decision of the RTC was executed pending
appeal and funds of NAPOCOR were garnished by respondents Ibrahim and
his co-heirs.
On October 4, 1996, a Petition for Relief from Judgment was filed by
respondents Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom,
Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Potrisam G.
Maruhom and Lumba G. Maruhom asserting as follows:
1) they did not file a motion to reconsider or appeal
the decision within the reglementary period of fifteen
(15) days from receipt of judgment because they
believed in good faith that the decision was for
damages and rentals and attorneys fees only as
prayed for in the complaint:
2) it was only on August 26, 1996 that they learned
that the amounts awarded to the plaintiffs
represented not only rentals, damages and attorneys
fees but the greatest portion of which was payment of
just compensation which in effect would make the
defendant NPC the owner of the parcels of land
involved in the case;
3) when they learned of the nature of the judgment,
the period of appeal has already expired;
 4) they were prevented by fraud, mistake, accident,
or excusable negligence from taking legal steps to
protect and preserve their rights over their parcels of
land in so far as the part of the decision decreeing just
compensation for petitioners properties;

5) they would never have agreed to the alienation of

their property in favor of anybody, considering the
fact that the parcels of land involved in this case were
among the valuable properties they inherited from
their dear father and they would rather see their land
crumble to dust than sell it to anybody.120[4]

The RTC granted the petition and rendered a modified judgment

dated September 8, 1997, thus:

WHEREFORE, a modified judgment is hereby

rendered:

1) Reducing the judgment award of
plaintiffs for the fair market value of
P48,005,000.00 by 9,526,000.00 or for a
difference by P38,479,000.00 and by the
further sum of P33,603,500.00 subject of the
execution pending appeal leaving a
difference of 4,878,500.00 which may be the
subject of execution upon the finality of this
modified judgment with 6% interest per
annum from the filing of the case until paid.
2) Awarding the sum of P1,476,911.00 to
herein petitioners Omar G. Maruhom, Elias
G. Maruhom, Bucay G. Maruhom, Mahmod
G. Maruhom, Farouk G. Maruhom, Hidjara
G. Maruhom, Portrisam G. Maruhom and
Lumba G. Maruhom as reasonable rental
deductible from the awarded sum of
P7,050,974.40 pertaining to plaintiffs.
3) Ordering defendant embodied in the
August 7, 1996 decision to pay plaintiffs the
sum of P200,000.00 as moral damages; and
further sum of P200,000.00 as attorneys fees
and costs.
SO ORDERED.121[5]
Subsequently, both respondent Ibrahim and NAPOCOR appealed to
the CA.
In the Decision dated June 8, 2005, the CA set aside the modified
judgment and reinstated the original Decision dated August 7, 1996,
amending it further by deleting the award of moral damages and reducing the
amount of rentals and attorneys fees, thus:
WHEREFORE, premises considered, herein Appeals
are hereby partially GRANTED, the Modified Judgment is
ordered SET ASIDE and rendered of no force and effect and
the original Decision of the court a quo dated 7 August 1996 is
hereby RESTORED with the MODIFICATION that the
award of moral damages is DELETED and the amounts of
rentals and attorneys fees are REDUCED to P6,888,757.40 and
P50,000.00, respectively.
In this connection, the Clerk of Court of RTC Lanao
del Sur is hereby directed to reassess and determine the
additional filing fee that should be paid by Plaintiff-Appellant
IBRAHIM taking into consideration the total amount of
damages sought in the complaint vis--vis the actual amount of
damages awarded by this Court. Such additional filing fee
shall constitute a lien on the judgment.
SO ORDERED.122[6]
 Hence, this petition ascribing the following errors to the CA:
(a) RESPONDENTS WERE NOT DENIED THE
BENEFICIAL USE OF THEIR SUBJECT
PROPERTIES TO ENTITLE THEM TO JUST
COMPENSATION BY WAY OF DAMAGES;
(b) ASSUMING THAT RESPONDENTS ARE
ENTITLED TO JUST COMPENSATION BY WAY OF
DAMAGES, NO EVIDENCE WAS PRESENTED
ANENT THE VALUATION OF RESPONDENTS
PROPERTY AT THE TIME OF ITS TAKING IN THE
YEAR 1978 TO JUSTIFY THE AWARD OF ONE
THOUSAND SQUARE METERS (P1000.00/SQ. M.)
EVEN AS PAYMENT OF BACK RENTALS IS ITSELF
IMPROPER.
This case revolves around the propriety of paying just compensation
to respondents, and, by extension, the basis for computing the same. The
threshold issue of whether respondents are entitled to just compensation
hinges upon who owns the sub-terrain area occupied by petitioner.
Petitioner maintains that the sub-terrain portion where the
underground tunnels were constructed does not belong to respondents
because, even conceding the fact that respondents owned the property, their
right to the subsoil of the same does not extend beyond what is necessary to
enable them to obtain all the utility and convenience that such property can
normally give. In any case, petitioner asserts that respondents were still able
to use the subject property even with the existence of the tunnels, citing as an
example the fact that one of the respondents, Omar G. Maruhom, had
established his residence on a part of the property. Petitioner concludes that
the underground tunnels 115 meters below respondents property could not
have caused damage or prejudice to respondents and their claim to this effect
was, therefore, purely conjectural and speculative.123[7]
The contention lacks merit.
Generally, in an appeal by certiorari under Rule 45 of the Rules of
Court, the Court does not pass upon questions of fact. Absent any showing
that the trial and appellate courts gravely abused their discretion, the Court
will not examine the evidence introduced by the parties below to determine if
they correctly assessed and evaluated the evidence on record. 124 [8] The
jurisdiction of the Court in cases brought to it from the CA is limited to
reviewing and revising the errors of law imputed to it, its findings of fact being
as a rule conclusive and binding on the Court.
In the present case, petitioner failed to point to any evidence
demonstrating grave abuse of discretion on the part of the CA or to any other
circumstances which would call for the application of the exceptions to the
above rule. Consequently, the CAs findings which upheld those of the trial
court that respondents owned and possessed the property and that its
substrata was possessed by petitioner since 1978 for the underground tunnels,
cannot be disturbed. Moreover, the Court sustains the finding of the lower
courts that the sub-terrain portion of the property similarly belongs to
respondents. This conclusion is drawn from Article 437 of the Civil Code
which provides:
ART. 437. The owner of a parcel of land is the owner
of its surface and of everything under it, and he can construct
thereon any works or make any plantations and excavations
which he may deem proper, without detriment to servitudes
and subject to special laws and ordinances. He cannot
complain of the reasonable requirements of aerial navigation.
Thus, the ownership of land extends to the surface as well as to the subsoil
under it. In Republic of the Philippines v. Court of Appeals,125[9] this principle
was applied to show that rights over lands are indivisible and, consequently,
require a definitive and categorical classification, thus:
The Court of Appeals justified this by saying there is
no conflict of interest between the owners of the surface
rights and the owners of the sub-surface rights. This is rather
strange doctrine, for it is a well-known principle that the
owner of a piece of land has rights not only to its surface but
also to everything underneath and the airspace above it up
to a reasonable height. Under the aforesaid ruling, the land
is classified as mineral underneath and agricultural on the
surface, subject to separate claims of title. This is also
difficult to understand, especially in its practical application.
Under the theory of the respondent court, the surface
owner will be planting on the land while the mining locator
will be boring tunnels underneath. The farmer cannot dig a
well because he may interfere with the mining operations
below and the miner cannot blast a tunnel lest he destroy the
crops above. How deep can the farmer, and how high can
the miner go without encroaching on each others rights?
Where is the dividing line between the surface and the sub-
surface rights?
The Court feels that the rights over the land are
indivisible and that the land itself cannot be half agricultural
and half mineral. The classification must be categorical; the
land must be either completely mineral or completely
agricultural.
Registered landowners may even be ousted of ownership and
possession of their properties in the event the latter are reclassified as mineral
lands because real properties are characteristically indivisible. For the loss
sustained by such owners, they are entitled to just compensation under the
Mining Laws or in appropriate expropriation proceedings.126[10]
Moreover, petitioners argument that the landowners right extends to
the sub-soil insofar as necessary for their practical interests serves only to
further weaken its case. The theory would limit the right to the sub-soil upon
the economic utility which such area offers to the surface owners. Presumably,
the landowners right extends to such height or depth where it is possible for
them to obtain some benefit or enjoyment, and it is extinguished beyond such
limit as there would be no more interest protected by law.127[11]
In this regard, the trial court found that respondents could have dug
upon their property motorized deep wells but were prevented from doing so
by the authorities precisely because of the construction and existence of the
tunnels underneath the surface of their property. Respondents, therefore, still
had a legal interest in the sub-terrain portion insofar as they could have
excavated the same for the construction of the deep well. The fact that they
could not was appreciated by the RTC as proof that the tunnels interfered with
respondents enjoyment of their property and deprived them of its full use and
enjoyment, thus:
Has it deprived the plaintiffs of the use of their lands
when from the evidence they have already existing residential
houses over said tunnels and it was not shown that the
tunnels either destroyed said houses or disturb[ed] the
possession thereof by plaintiffs? From the evidence, an
affirmative answer seems to be in order. The plaintiffs and
[their] co-heirs discovered [these] big underground tunnels in
1992. This was confirmed by the defendant on November 13,
1992 by the Acting Assistant Project Manager, Agus 1 Hydro
Electric Project (Exh. K). On September 16, 1992, Atty. Omar
Maruhom (co-heir) requested the Marawi City Water District
for permit to construct a motorized deep well over Lot 3 for
his residential house (Exh. Q). He was refused the permit
because the construction of the deep well as (sic) the parcels
of land will cause danger to lives and property. He was
informed that beneath your lands are constructed the
Napocor underground tunnel in connection with Agua
Hydroelectric plant (Exh. Q-2). There in fact exists ample
evidence that this construction of the tunnel without the prior
consent of plaintiffs beneath the latters property endangered
the lives and properties of said plaintiffs. It has been proved
indubitably that Marawi City lies in an area of local volcanic
and tectonic activity. Lake Lanao has been formed by
extensive earth movements and is considered to be a
drowned basin of volcano/tectonic origin. In Marawi City,
there are a number of former volcanoes and an extensive
amount of faulting. Some of these faults are still moving.
(Feasibility Report on Marawi City Water District by Kampsa-
Kruger, Consulting Engineers, Architects and Economists,
Exh. R). Moreover, it has been shown that the underground
tunnels [have] deprived the plaintiffs of the lawful use of the
land and considerably reduced its value. On March 6, 1995,
plaintiffs applied for a two-million peso loan with the
Amanah Islamic Bank for the expansion of the operation of
the Ameer Construction and Integrated Services to be secured
by said land (Exh. N), but the application was disapproved by
the bank in its letter of April 25, 1995 (Exh. O) stating that:
Apropos to this, we regret to inform
you that we cannot consider your loan
application due to the following reasons, to
wit:
That per my actual ocular inspection and
verification, subject property offered as
collateral has an existing underground
tunnel by the NPC for the Agus I Project,
which tunnel is traversing underneath your
property, hence, an encumbrance. As a
matter of bank policy, property with an
 existing encumbrance cannot be considered
neither accepted as collateral for a loan.
All the foregoing evidence and findings convince this
Court that preponderantly plaintiffs have established the
condemnation of their land covering an area of 48,005 sq.
meters located at Saduc, Marawi City by the defendant
National Power Corporation without even the benefit of
expropriation proceedings or the payment of any just
compensation and/or reasonable monthly rental since
1978.128[12]
In the past, the Court has held that if the government takes property without
expropriation and devotes the property to public use, after many years, the
property owner may demand payment of just compensation in the event
restoration of possession is neither convenient nor feasible.129[13] This is in
accordance with the principle that persons shall not be deprived of their
property except by competent authority and for public use and always upon
payment of just compensation.130[14]
Petitioner contends that the underground tunnels in this case
constitute an easement upon the property of respondents which does not
involve any loss of title or possession. The manner in which the easement was
created by petitioner, however, violates the due process rights of respondents
as it was without notice and indemnity to them and did not go through proper
expropriation proceedings. Petitioner could have, at any time, validly
exercised the power of eminent domain to acquire the easement over
respondents property as this power encompasses not only the taking or
appropriation of title to and possession of the expropriated property but
likewise covers even the imposition of a mere burden upon the owner of the
condemned property. 131 [15] Significantly, though, landowners cannot be
deprived of their right over their land until expropriation proceedings are
instituted in court. The court must then see to it that the taking is for public
use, that there is payment of just compensation and that there is due process
of law.132[16]
In disregarding this procedure and failing to recognize respondents
ownership of the sub-terrain portion, petitioner took a risk and exposed itself
to greater liability with the passage of time. It must be emphasized that the
acquisition of the easement is not without expense. The underground tunnels
impose limitations on respondents use of the property for an indefinite period
and deprive them of its ordinary use. Based upon the foregoing, respondents
are clearly entitled to the payment of just compensation. 133 [17]
Notwithstanding the fact that petitioner only occupies the sub-terrain portion,
it is liable to pay not merely an easement fee but rather the full compensation
for land. This is so because in this case, the nature of the easement practically
deprives the owners of its normal beneficial use. Respondents, as the owners
of the property thus expropriated, are entitled to a just compensation which
should be neither more nor less, whenever it is possible to make the
assessment, than the money equivalent of said property.134[18]
The entitlement of respondents to just compensation having been
settled, the issue now is on the manner of computing the same. In this regard,
petitioner claims that the basis for the computation of the just compensation
should be the value of the property at the time it was taken in 1978. Petitioner
also impugns the reliance made by the CA upon National Power Corporation v.
Court of Appeals and Macapanton Mangondato135[19] as the basis for computing
the amount of just compensation in this action. The CA found that the award
of damages is not excessive because the P1000 per square meter as the fair
market value was sustained in a case involving a lot adjoining the property in
question which case involved an expropriation by [petitioner] of portion of
Lot 1 of the subdivision plan (LRC) PSD 116159 which is adjacent to Lots 2 and
3 of the same subdivision plan which is the subject of the instant
controversy.136[20]
Just compensation has been understood to be the just and complete
equivalent of the loss137[21] and is ordinarily determined by referring to the
value of the land and its character at the time it was taken by the expropriating
authority.138[22] There is a taking in this sense when the owners are actually
deprived or dispossessed of their property, where there is a practical
destruction or a material impairment of the value of their property, or when
they are deprived of the ordinary use thereof. There is a taking in this context
when the expropriator enters private property not only for a momentary
period but for more permanent duration, for the purpose of devoting the
property to a public use in such a manner as to oust the owner and deprive
him of all beneficial enjoyment thereof. 139 [23] Moreover, taking of the
property for purposes of eminent domain entails that the entry into the
property must be under warrant or color of legal authority.140[24]
Under the factual backdrop of this case, the last element of taking
mentioned, i.e., that the entry into the property is under warrant or color of
legal authority, is patently lacking. Petitioner justified its nonpayment of the
indemnity due respondents upon its mistaken belief that the property formed
part of the public dominion.
This situation is on all fours with that in the Mangondato case.
NAPOCOR in that case took the property of therein respondents in 1979, using
it to build its Aqua I Hydroelectric Plant Project, without paying any
compensation, allegedly under the mistaken belief that it was public land. It
was only in 1990, after more than a decade of beneficial use, that NAPOCOR
recognized therein respondents ownership and negotiated for the voluntary
purchase of the property.
In Mangondato, this Court held:
The First Issue: Date of Taking or Date of Suit?
The general rule in determining just compensation
in eminent domain is the value of the property as of the date
of the filing of the complaint, as follows:
Sec. 4. Order of Condemnation. When such a motion is
overruled or when any party fails to defend as required by
this rule, the court may enter an order of condemnation
declaring that the plaintiff has a lawful right to take the
property sought to be condemned, for the public use or
purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the
complaint. x x x (Italics supplied).
Normally, the time of the taking coincides with the
filing of the complaint for expropriation. Hence, many ruling
of this Court have equated just compensation with the value
of the property as of the time of filing of the complaint
consistent with the above provision of the Rules. So too,
where the institution of the action precedes entry to the
property, the just compensation is to be ascertained as of the
time of filing of the complaint.
The general rule, however, admits of an exception:
where this Court fixed the value of the property as of the
date it was taken and not the date of the commencement of
the expropriation proceedings.
In the old case of Provincial Government of Rizal vs.
Caro de Araullo, the Court ruled that x x x the owners of the
land have no right to recover damages for this unearned
increment resulting from the construction of the public
improvement (lengthening of Taft Avenue from Manila to
Pasay) from which the land was taken. To permit them to do
so would be to allow them to recover more than the value of
the land at the time it was taken, which is the true measure of
the damages, or just compensation, and would discourage the
construction of important public improvements.
In subsequent cases, the Court, following the above
doctrine, invariably held that the time of taking is the
critical date in determining lawful or just compensation.
Justifying this stance, Mr. Justice (later Chief Justice) Enrique
Fernando, speaking for the Court in Municipality of La Carlota
vs. The Spouses Felicidad Baltazar and Vicente Gan, said, x x x the
owner as is the constitutional intent, is paid what he is entitled
to according to the value of the property so devoted to public
use as of the date of taking. From that time, he had been
deprived thereof. He had no choice but to submit. He is not,
however, to be despoiled of such a right. No less than the
fundamental law guarantees just compensation. It would be
injustice to him certainly if from such a period, he could not
recover the value of what was lost. There could be on the
other hand, injustice to the expropriator if by a delay in the
collection, the increment in price would accrue to the owner.
The doctrine to which this Court has been committed is
intended precisely to avoid either contingency fraught with
unfairness.
Simply stated, the exception finds the application
where the owner would be given undue incremental
advantages arising from the use to which the government
devotes the property expropriated -- as for instance, the
extension of a main thoroughfare as was in the case in Caro de
Araullo. In the instant case, however, it is difficult to
conceive of how there could have been an extra-ordinary
increase in the value of the owners land arising from the
expropriation, as indeed the records do not show any
evidence that the valuation of P1,000.00 reached in 1992 was
due to increments directly caused by petitioners use of the
land. Since the petitioner is claiming an exception to Rule 67,
Section 4, it has the burden in proving its claim that its
occupancy and use -- not ordinary inflation and increase in
land values -- was the direct cause of the increase in valuation
from 1978 to 1992.
Side Issue: When is there Taking of Property?
But there is yet another cogent reason why this
petition should be denied and why the respondent Court
should be sustained. An examination of the undisputed
factual environment would show that the taking was not
really made in 1978.
This Court has defined the elements of taking as the
main ingredient in the exercise of power of eminent domain,
in the following words:
A number of circumstances must be present in taking
of property for purposes of eminent domain: (1) the
expropriator must enter a private property; (2) the entrance
into private property must be for more than a momentary
period; (3) the entry into the property should be under warrant or
color of legal authority; (4) the property must be devoted to a
public use or otherwise informally appropriated or
injuriously affected; and (5) the utilization of the property for
public use must be in such a way to oust the owner and
deprive him of all beneficial enjoyment of the property.(Italics
supplied)
In this case, the petitioners entrance in 1978 was
without intent to expropriate or was not made under warrant or
color of legal authority, for it believed the property was public
land covered by Proclamation No. 1354. When the private
respondent raised his claim of ownership sometime in 1979,
the petitioner flatly refused the claim for compensation,
nakedly insisted that the property was public land and
wrongly justified its possession by alleging it had already
paid financial assistance to Marawi City in exchange for the
rights over the property. Only in 1990, after more than a
decade of beneficial use, did the petitioner recognize private
respondents ownership and negotiate for the voluntary
purchase of the property. A Deed of Sale with provisional
payment and subject to negotiations for the correct price was
then executed. Clearly, this is not the intent nor the
expropriation contemplated by law. This is a simple attempt
at a voluntary purchase and sale. Obviously, the petitioner
neglected and/or refused to exercise the power of eminent
domain.
Only in 1992, after the private respondent sued to
recover possession and petitioner filed its Complaint to
expropriate, did petitioner manifest its intention to exercise
the power of eminent domain. Thus the respondent Court
correctly held:
If We decree that the fair market value of the land
be determined as of 1978, then We would be sanctioning a
deceptive scheme whereby NAPOCOR, for any reason
other than for eminent domain would occupy anothers
property and when later pressed for payment, first negotiate
for a low price and then conveniently expropriate the
property when the land owner refuses to accept its offer
claiming that the taking of the property for the purpose of
the eminent domain should be reckoned as of the date when
it started to occupy the property and that the value of the
property should be computed as of the date of the taking
despite the increase in the meantime in the value of the
property.
In Noble vs. City of Manila, the City entered into a
lease-purchase agreement of a building constructed by the
petitioners predecessor-in-interest in accordance with the
specifications of the former. The Court held that being bound
by the said contract, the City could not expropriate the
building. Expropriation could be resorted to only when it is
made necessary by the opposition of the owner to the sale or
by the lack of any agreement as to the price. Said the Court:
The contract, therefore, in so far as it refers to the
purchase of the building, as we have interpreted it, is in force,
not having been revoked by the parties or by judicial decision.
This being the case, the city being bound to buy the building
at an agreed price, under a valid and subsisting contract, and
the plaintiff being agreeable to its sale, the expropriation
thereof, as sought by the defendant, is baseless. Expropriation
lies only when it is made necessary by the opposition of the owner to
the sale or by the lack of any agreement as to the price. There being
in the present case a valid and subsisting contract, between
the owner of the building and the city, for the purchase
thereof at an agreed price, there is no reason for the
expropriation. (Italics supplied)
In the instant case, petitioner effectively repudiated
the deed of sale it entered into with the private respondent
when it passed Resolution No. 92-121 on May 25, 1992
authorizing its president to negotiate, inter alia, that payment
 shall be effective only after Agus I HE project has been placed
in operation. It was only then that petitioners intent to
expropriate became manifest as private respondent disagreed
and, barely a month, filed suit.141[25]
In the present case, to allow petitioner to use the date it constructed
the tunnels as the date of valuation would be grossly unfair. First, it did not
enter the land under warrant or color of legal authority or with intent to
expropriate the same. In fact, it did not bother to notify the owners and
wrongly assumed it had the right to dig those tunnels under their property.
Secondly, the improvements introduced by petitioner, namely, the tunnels, in
no way contributed to an increase in the value of the land. The trial court,
therefore, as affirmed by the CA, rightly computed the valuation of the
property as of 1992, when respondents discovered the construction of the huge
underground tunnels beneath their lands and petitioner confirmed the same
and started negotiations for their purchase but no agreement could be
reached.142[26]
As to the amount of the valuation, the RTC and the CA both used as
basis the value of the adjacent property, Lot 1 (the property involved herein
being Lots 2 and 3 of the same subdivision plan), which was valued at P1,000
per sq. meter as of 1990, as sustained by this Court in Mangondato, thus:
The Second Issue: Valuation
We now come to the issue of valuation.
The fair market value as held by the respondent
Court, is the amount of P1,000.00 per square meter. In an
expropriation case where the principal issue is the
determination of just compensation, as is the case here, a trial
before Commissioners is indispensable to allow the parties to
present evidence on the issue of just compensation. Inasmuch
as the determination of just compensation in eminent domain
cases is a judicial function and factual findings of the Court of
Appeals are conclusive on the parties and reviewable only
when the case falls within the recognized exceptions, which
is not the situation obtaining in this petition, we see no reason
to disturb the factual findings as to valuation of the subject
property. As can be gleaned from the records, the court-and-
the-parties-appointed commissioners did not abuse their
authority in evaluating the evidence submitted to them nor
misappreciate the clear preponderance of evidence. The
amount fixed and agreed to by the respondent appellate
Court is not grossly exorbitant. To quote:
Commissioner Ali comes from the Office of the
Register of Deeds who may well be considered an expert, with
a general knowledge of the appraisal of real estate and the
prevailing prices of land in the vicinity of the land in question
so that his opinion on the valuation of the property cannot be
lightly brushed aside.
The prevailing market value of the land is only one of
the determinants used by the commissioners report the other
being as herein shown:
xxx
xxx
Commissioner Doromals report, recommending
P300.00 per square meter, differs from the 2 commissioners
only because his report was based on the valuation as of 1978
 by the City Appraisal Committee as clarified by the latters
chairman in response to NAPOCORs general counsels query.

In sum, we agree with the Court of Appeals that

petitioner has failed to show why it should be granted an
exemption from the general rule in determining just
compensation provided under Section 4 of Rule 67. On the
contrary, private respondent has convinced us that, indeed,
such general rule should in fact be observed in this
case.143[27]

Petitioner has not shown any error on the part of the CA in reaching
such a valuation. Furthermore, these are factual matters that are not within the
ambit of the present review.

WHEREFORE, the petition is DENIED and the Decision of the Court

of Appeals in C.A.-G.R. CV No. 57792 dated June 8, 2005 is AFFIRMED.

No costs.

SO ORDERED.
Republic of the Philippines MONGKOY*, and AMIR, all Promulgated:
surnamed MACABANGKIT,
Supreme Court
Respondents.
Manila

August 24, 2011

FIRST DIVISION
x-----------------------------------------------------------------------------------------x

DECISION

NATIONAL POWER G.R. No. 165828

CORPORATION,

Petitioner,
Present: BERSAMIN, J.:

CORONA, C.J., Chairperson, Private property shall not be taken for public use
- versus - without just compensation.
LEONARDO-DE CASTRO, Section 9, Article III, 1987 Constitution

BERSAMIN,

DEL CASTILLO, and The application of this provision of the Constitution is the focus of this
HEIRS OF MACABANGKIT appeal.
SANGKAY, namely: CEBU, VILLARAMA, JR., JJ.
BATOWA-AN, SAYANA, NASSER,
MANTA, EDGAR, PUTRI ,
Petitioner National Power Corporation (NPC) seeks the review on
certiorari of the decision promulgated on October 5, 2004,144[1] whereby the
Court of Appeals (CA) affirmed the decision dated August 13, 1999 and the
supplemental decision dated August 18, 1999, ordering NPC to pay just
compensation to the respondents, both rendered by the Regional Trial Court,
Branch 1, in Iligan City (RTC).
Antecedents
Pursuant to its legal mandate under Republic Act No. 6395 (An Act
Revising the Charter of the National Power Corporation), NPC undertook the Agus
River Hydroelectric Power Plant Project in the 1970s to generate electricity for
Mindanao. The project included the construction of several underground
tunnels to be used in diverting the water flow from the Agus River to the
hydroelectric plants.145[2]
On November 21, 1997, the respondents, namely: Cebu, Bangowa-an,
Sayana, Nasser, Manta, Edgar, Putri, Mongkoy and Amir, all surnamed
Macabangkit (Heirs of Macabangkit), as the owners of land with an area of
221,573 square meters situated in Ditucalan, Iligan City, sued NPC in the RTC
for the recovery of damages and of the property, with the alternative prayer
for the payment of just compensation. 146 [3] They alleged that they had
belatedly discovered that one of the underground tunnels of NPC that
diverted the water flow of the Agus River for the operation of the
Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land;
that their discovery had occurred in 1995 after Atty. Saidali C. Gandamra,
President of the Federation of Arabic Madaris School, had rejected their offer
to sell the land because of the danger the underground tunnel might pose to
the proposed Arabic Language Training Center and Muslims Skills
Development Center; that such rejection had been followed by the withdrawal
by Global Asia Management and Resource Corporation from developing the
land into a housing project for the same reason; that Al-Amanah Islamic
Investment Bank of the Philippines had also refused to accept their land as
collateral because of the presence of the underground tunnel; that the
underground tunnel had been constructed without their knowledge and
consent; that the presence of the tunnel deprived them of the agricultural,
commercial, industrial and residential value of their land; and that their land
had also become an unsafe place for habitation because of the loud sound of
the water rushing through the tunnel and the constant shaking of the ground,
forcing them and their workers to relocate to safer grounds.
In its answer with counterclaim,147[4] NPC countered that the Heirs
of Macabangkit had no right to compensation under section 3(f) of Republic
Act No. 6395, under which a mere legal easement on their land was
established; that their cause of action, should they be entitled to compensation,
already prescribed due to the tunnel having been constructed in 1979; and that
by reason of the tunnel being an apparent and continuous easement, any
action arising from such easement prescribed in five years.
Ruling of the RTC
On July 23, 1998, an ocular inspection of the land that was conducted
by RTC Judge Mamindiara P. Mangotara and the representatives of the parties
resulted in the following observations and findings:
 a. That a concrete post which is about two feet in length (P113,532,500.00), PESOS, plus interest, as actual
from the ground which according to the claimants is the damages or just compensation;
middle point of the tunnel.
b) To pay plaintiff a monthly rental of their
b. That at least three fruit bearing durian trees were land in the amount of THIRTY THOUSAND
uprooted and as a result of the construction by the (P30,000.00) PESOS from 1979 up to July 1999 with 12%
defendant of the tunnel and about one hundred coconuts interest per annum;
planted died.

c)To pay plaintiffs the sum of TWO HUNDRED

c. That underground tunnel was constructed THOUSAND (P200,000.00) PESOS, as moral damages;
therein.148[5]

d) To pay plaintiffs, the sum of TWO

HUNDRED THOUSAND (P200,000.00) PESOS, as
After trial, the RTC ruled in favor of the plaintiffs (Heirs of exemplary damages;
Macabangkit),149[6] decreeing:

e)To pay plaintiffs, the sum equivalent to 15% of the

total amount awarded, as attorneys fees, and to pay the
cost.
WHEREFORE, premises considered:
SO ORDERED.
1. The prayer for the removal or dismantling of
defendants tunnel is denied. However, defendant is hereby
directed and ordered:

a)To pay plaintiffs land with a total area of 227,065 The RTC found that NPC had concealed the construction of the tunnel
square meters, at the rate of FIVE HUNDRED (P500.00) in 1979 from the Heirs of Macabangkit, and had since continuously denied its
PESOS per square meter, or a total of ONE HUNDRED existence; that NPC had acted in bad faith by taking possession of the
THIRTEEN MILLION FIVE HUNDRED THIRTY TWO subterranean portion of their land to construct the tunnel without their
THOUSAND AND FIVE HUNDRED knowledge and prior consent; that the existence of the tunnel had affected the
entire expanse of the land, and had restricted their right to excavate or to
construct a motorized deep well; and that they, as owners, had lost the
agricultural, commercial, industrial and residential value of the land.
The RTC fixed the just compensation at P500.00/square meter based
on the testimony of Dionisio Banawan, OIC-City Assessor of Iligan City, to the
effect that the appraised value of the adjoining properties ranged from P700.00
to P750.00, while the appraised value of their affected land ranged from
P400.00 to P500.00. The RTC also required NPC to pay rentals from 1979 due
to its bad faith in concealing the construction of the tunnel from the Heirs of
Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision,150[7]
viz:
Upon a careful review of the original decision dated
August 13, 1999, a sentence should be added to paragraph
1(a) of the dispositive portion thereof, to bolster, harmonize,
and conform to the findings of the Court, which is quoted
hereunder, to wit:
Consequently, plaintiffs land or properties are
hereby condemned in favor of defendant National
Power Corporation, upon payment of the aforesaid
sum.
Therefore, paragraph 1(a) of the dispositive portion of
the original decision should read, as follows:
a) To pay plaintiffs land with a total area of 227,065
square meters, at the rate of FIVE HUNDRED
(P500.00) PESOS per square meter, or a total of
ONE HUNDRED THIRTEEN MILLION FIVE
HUNDRED THIRTY TWO THOUSAND AND
FIVE HUNDRED (P113,532,500.00) PESOS, plus
interest, as actual damages or just compensation;
Consequently, plaintiffs land or properties are
hereby condemned in favor of defendant National
Power Corporation, upon payment of the aforesaid
sum;
This supplemental decision shall be considered as part
of paragraph 1(a) of the dispositive portion of the original
decision.
Furnish copy of this supplemental decision to all parties
immediately.
SO ORDERED.
On its part, NPC appealed to the CA on August 25, 1999.151[8]
Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent
motion for execution of judgment pending appeal.152[9] The RTC granted the
motion and issued a writ of execution,153[10] prompting NPC to assail the
writ by petition for certiorari in the CA. On September 15, 1999, the CA issued
a temporary restraining order (TRO) to enjoin the RTC from implementing its
decision. The Heirs of Macabangkit elevated the ruling of the CA (G.R. No. existence of the underground tunnel traversing the land of the Heirs of
141447), but the Court upheld the CA on May 4, 2006.154[11] Macabangkit; that NPC did not substantiate its defense that prescription
already barred the claim of the Heirs of Macabangkit; and that Section 3(i) of
R.A. No. 6395, being silent about tunnels, did not apply, viz:

Ruling of the CA

As regard Section 3(i) of R.A. No. 6395 (An Act Revising

the Charter of the National Power Corporation), it is
NPC raised only two errors in the CA, namely: submitted that the same provision is not applicable. There is
nothing in Section 3(i) of said law governing claims involving
tunnels. The same provision is applicable to those projects or
facilities on the surface of the land, that can easily be
I
discovered, without any mention about the claims involving
THE COURT A QUO SERIOUSLY ERRED IN RULING
tunnels, particularly those surreptitiously constructed
THAT NAPOCORS UNDERGROUND TUNNEL IN ITS
beneath the surface of the land, as in the instant case.
AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT
TRAVERSED AND/OR AFFECTED APPELLEES
Now, while it is true that Republic Act No. 6395
PROPERTY AS THERE IS NO CLEAR EVIDENCE
authorizes NAPOCOR to take water from any public stream,
INDUBITABLY ESTABLISHING THE SAME
river, creek, lake, spring or waterfall in the Philippines for the
realization of the purposes specified therein for its creation; to
II
intercept and divert the flow of waters from lands of riparian
THE COURT A QUO SERIOUSLY ERRED IN GRANTING
owners (in this case, the Heirs), and from persons owning or
APPELLEES CLAIMS IN THEIR ENTIRETY FOR
interested in water which are or may be necessary to said
GRANTING ARGUENDO THAT NAPOCORS
purposes, the same Act expressly mandates the payment of
UNDERGROUND TUNNEL INDEED TRAVERSED
just compensation.
APPELLEES PROPERTY, THEIR CAUSE OF ACTION HAD
ALREADY BEEN BARRED BY PRESCRIPTION, ESTOPPEL
WHEREFORE, premises considered, the instant appeal
AND LACHES
is hereby DENIED for lack of merit. Accordingly, the
appealed Decision dated August 13, 1999, and the
supplemental Decision dated August 18, 1999, are hereby
AFFIRMED in toto.
On October 5, 2004, the CA affirmed the decision of the RTC, holding
that the testimonies of NPCs witness Gregorio Enterone and of the
SO ORDERED.155[12]
respondents witness Engr. Pete Sacedon, the topographic survey map, the
sketch map, and the ocular inspection report sufficiently established the
Issue (1) Whether the CA and the RTC erred in holding that
there was an underground tunnel traversing the Heirs of
Macabangkits land constructed by NPC; and

NPC has come to the Court, assigning the lone error that: (2) Whether the Heirs of Macabangkits right to claim
just compensation had prescribed under section 3(i) of
Republic Act No. 6395, or, alternatively, under Article 620 and
Article 646 of the Civil Code.
THE APPELLATE COURT ERRED ON A QUESTION OF
LAW WHEN IT AFFIRMED THE DECISION AND
SUPPLEMENTAL DECISION OF THE COURT A QUO
DIRECTING AND ORDERING PETITIONER TO PAY JUST Ruling
COMPENSATION TO RESPONDENTS.

We uphold the liability of NPC for payment of just compensation.

NPC reiterates that witnesses Enterone and Sacedon lacked personal
knowledge about the construction and existence of the tunnel and were for
that reason not entitled to credence; and that the topographic and relocation
maps prepared by Sacedon should not be a basis to prove the existence and 1.
location of the tunnel due to being self-serving.
Factual findings of the RTC,

when affirmed by the CA, are binding

NPC contends that the CA should have applied Section 3(i) of
Republic Act No. 6395, which provided a period of only five years from the
date of the construction within which the affected landowner could bring a
claim against it; and that even if Republic Act No. 6395 should be inapplicable,
the action of the Heirs of Macabangkit had already prescribed due to the
underground tunnel being susceptible to acquisitive prescription after the
lapse of 10 years pursuant to Article 620 of the Civil Code due to its being a
continuous and apparent legal easement under Article 634 of the Civil Code.
The existence of the tunnel underneath the land of the Heirs of
Macabangkit, being a factual matter, cannot now be properly reviewed by the
Court, for questions of fact are beyond the pale of a petition for review on
certiorari. Moreover, the factual findings and determinations by the RTC as the
trial court are generally binding on the Court, particularly after the CA

The issues for resolution are, therefore, as follows:

affirmed them. 156 [13] Bearing these doctrines in mind, the Court should
rightly dismiss NPCs appeal.
NPC argues, however, that this appeal should not be dismissed
because the Heirs of Macabangkit essentially failed to prove the existence of
the underground tunnel. It insists that the topographic survey map and the
right-of-way map presented by the Heirs of Macabangkit did not at all
establish the presence of any underground tunnel.
NPC still fails to convince.
Even assuming, for now, that the Court may review the factual
findings of the CA and the RTC, for NPC to insist that the evidence on the
existence of the tunnel was not adequate and incompetent remains futile. On
the contrary, the evidence on the tunnel was substantial, for the significance
of the topographic survey map and the sketch map (as indicative of the extent
and presence of the tunnel construction) to the question on the existence of the
tunnel was strong, as the CA correctly projected in its assailed decision, viz:
Among the pieces of documentary evidence presented
showing the existence of the said tunnel beneath the subject
property is the topographic survey map. The topographic
survey map is one conducted to know about the location and
elevation of the land and all existing structures above and
underneath it. Another is the Sketch Map which shows the
location and extent of the land traversed or affected by the
said tunnel. These two (2) pieces of documentary evidence
readily point the extent and presence of the tunnel
construction coming from the power cavern near the small
man-made lake which is the inlet and approach tunnel, or
at a distance of about two (2) kilometers away from the land
of the plaintiffs-appellees, and then traversing the entire
and the whole length of the plaintiffs-appellees property,
and the outlet channel of the tunnel is another small man-
made lake. This is a sub-terrain construction, and considering
that both inlet and outlet are bodies of water, the tunnel can
hardly be noticed. All constructions done were beneath the
surface of the plaintiffs-appellees property. This explains why
they could never obtain any knowledge of the existence of
such tunnel during the period that the same was constructed
and installed beneath their property.157[14]
The power cavern and the inlet and outlet channels established the
presence of the underground tunnel, based on the declaration in the RTC by
Sacedon, a former employee of the NPC.158[15] It is worthy to note that NPC
did not deny the existence of the power cavern, and of the inlet and outlet
channels adverted to and as depicted in the topographic survey map and the
sketch map. The CA cannot be faulted for crediting the testimony of Sacedon
despite the effort of NPC to discount his credit due to his not being an expert
witness, simply because Sacedon had personal knowledge based on his being
NPCs principal engineer and supervisor tasked at one time to lay out the
tunnels and transmission lines specifically for the hydroelectric
projects,159[16] and to supervise the construction of the Agus 1 Hydroelectric
Plant itself160[17] from 1978 until his retirement from NPC.161[18] Besides, he
declared that he personally experienced the vibrations caused by the rushing
currents in the tunnel, particularly near the outlet channel.162[19] Under any
circumstances, Sacedon was a credible and competent witness.
The ocular inspection actually confirmed the existence of the tunnel
underneath the land of the Heirs of Macabangkit. Thus, the CA observed:
More so, the Ocular inspection conducted on July 23,
1998 further bolstered such claim of the existence and extent
of such tunnel. This was conducted by a team composed of
the Honorable Presiding Judge of the Regional Trial Court,
Branch 01, Lanao del Norte, herself and the respective
lawyers of both of the parties and found that, among others,
said underground tunnel was constructed beneath the
subject property.163[20]
It bears noting that NPC did not raise any issue against or tender any
contrary comment on the ocular inspection report.
2.
Five-year prescriptive period under Section 3(i) of Republic
Act No. 6395 does not apply to claims for just compensation
The CA held that Section 3(i) of Republic Act No. 6395 had no
application to this action because it covered facilities that could be easily
discovered, not tunnels that were inconspicuously constructed beneath the
surface of the land.164[21]
NPC disagrees, and argues that because Article 635165[22] of the Civil
Code directs the application of special laws when an easement, such as the
underground tunnel, was intended for public use, the law applicable was
Section 3(i) of Republic Act No. 6395, as amended, which limits the action for
recovery of compensation to five years from the date of construction. It posits
that the five-year prescriptive period already set in due to the construction of
the underground tunnel having been completed in 1979 yet.
Without necessarily adopting the reasoning of the CA, we uphold its
conclusion that prescription did not bar the present action to recover just
compensation.
Section 3 (i) of Republic Act No. 6395, the cited law, relevantly
provides:
Section 3. Powers and General Functions of the Corporation.
The powers, functions, rights and activities of the Corporation
shall be the following:
xxx
(i) To construct works across, or otherwise, any
stream, watercourse, canal, ditch, flume, street,
avenue, highway or railway of private and public
ownership, as the location of said works may
require:Provided, That said works be constructed in
such a manner as not to endanger life or property;
And provided, further, That the stream,
watercourse, canal ditch, flume, street, avenue,
highway or railway so crossed or intersected be
restored as near as possible to their former state, or
in a manner not to impair unnecessarily their
usefulness. Every person or entity whose right of
way or property is lawfully crossed or intersected
by said works shall not obstruct any such crossings
or intersection and shall grant the Board or its
representative, the proper authority for the
execution of such work. The Corporation is hereby
given the right of way to locate, construct and
maintain such works over and throughout the
lands owned by the Republic of the Philippines or
any of its branches and political subdivisions. The
Corporation or its representative may also enter
upon private property in the lawful performance or
prosecution of its business and purposes, including
the construction of the transmission lines thereon;
Provided, that the owner of such property shall be
indemnified for any actual damage caused
thereby;Provided, further, That said action for
damages is filed within five years after the rights
of way, transmission lines, substations, plants or
other facilities shall have been established;
Provided, finally, That after said period, no suit shall
be brought to question the said rights of way,
transmission lines, substations, plants or other
facilities;
A cursory reading shows that Section 3(i) covers the construction of
works across, or otherwise, any stream, watercourse, canal, ditch, flume,
street, avenue, highway or railway of private and public ownership, as the
location of said works may require. It is notable that Section 3(i) includes no
limitation except those enumerated after the term works. Accordingly, we
consider the term works as embracing all kinds of constructions, facilities, and
other developments that can enable or help NPC to meet its objectives of
developing hydraulic power expressly provided under paragraph (g) of
Section 3.166[23] The CAs restrictive construal of Section 3(i) as exclusive of
tunnels was obviously unwarranted, for the provision applies not only to
development works easily discoverable or on the surface of the earth but also
to subterranean works like tunnels. Such interpretation accords with the
fundamental guideline in statutory construction that when the law does not
distinguish, so must we not. 167 [24] Moreover, when the language of the
statute is plain and free from ambiguity, and expresses a single, definite, and
sensible meaning, that meaning is conclusively presumed to be the meaning
that the Congress intended to convey.168[25]
Even so, we still cannot side with NPC.
We rule that the prescriptive period provided under Section 3(i) of
Republic Act No. 6395 is applicable only to an action for damages, and does
not extend to an action to recover just compensation like this case.
Consequently, NPC cannot thereby bar the right of the Heirs of Macabangkit
to recover just compensation for their land.
The action to recover just compensation from the State or its
expropriating agency differs from the action for damages. The former, also
known as inverse condemnation, has the objective to recover the value of
property taken in fact by the governmental defendant, even though no formal
exercise of the power of eminent domain has been attempted by the taking
agency.169[26] Just compensation is the full and fair equivalent of the property
taken from its owner by the expropriator. The measure is not the takers gain,
but the owners loss. The word just is used to intensify the meaning of the word
compensation in order to convey the idea that the equivalent to be rendered for
the property to be taken shall be real, substantial, full, and ample.170[27] On
the other hand, the latter action seeks to vindicate a legal wrong through
damages, which may be actual, moral, nominal, temperate, liquidated, or
exemplary. When a right is exercised in a manner not conformable with the
norms enshrined in Article 19171[28] and like provisions on human relations
in the Civil Code, and the exercise results to the damage of another, a legal
wrong is committed and the wrongdoer is held responsible.172[29]
The two actions are radically different in nature and purpose. The
action to recover just compensation is based on the Constitution173[30] while
the action for damages is predicated on statutory enactments. Indeed, the
former arises from the exercise by the State of its power of eminent domain
against private property for public use, but the latter emanates from the
transgression of a right. The fact that the owner rather than the expropriator
brings the former does not change the essential nature of the suit as an inverse
condemnation,174[31] for the suit is not based on tort, but on the constitutional
prohibition against the taking of property without just compensation.175[32]
It would very well be contrary to the clear language of the Constitution to bar
the recovery of just compensation for private property taken for a public use
solely on the basis of statutory prescription.
Due to the need to construct the underground tunnel, NPC should
have first moved to acquire the land from the Heirs of Macabangkit either by
voluntary tender to purchase or through formal expropriation proceedings. In
either case, NPC would have been liable to pay to the owners the fair market
value of the land, for Section 3(h) of Republic Act No. 6395 expressly requires
NPC to pay the fair market value of such property at the time of the taking,
thusly:
(h) To acquire, promote, hold, transfer, sell, lease, rent,
mortgage, encumber and otherwise dispose of property
incident to, or necessary, convenient or proper to carry out
the purposes for which the Corporation was created:
Provided, That in case a right of way is necessary for its
transmission lines, easement of right of way shall only be
sought: Provided, however, That in case the property itself
shall be acquired by purchase, the cost thereof shall be the
fair market value at the time of the taking of such property.
This was what NPC was ordered to do in National Power Corporation
v. Ibrahim,176[33] where NPC had denied the right of the owners to be paid
just compensation despite their land being traversed by the underground
tunnels for siphoning water from Lake Lanao needed in the operation of Agus
II, Agus III, Agus IV, Agus VI and Agus VII Hydroelectric Projects in Saguiran,
Lanao del Sur, in Nangca and Balo-I in Lanao del Norte and in Ditucalan and
Fuentes in Iligan City. There, NPC similarly argued that the underground
tunnels constituted a mere easement that did not involve any loss of title or
possession on the part of the property owners, but the Court resolved against
NPC, to wit:
liable to pay not merely an easement fee but rather the full compensation for
land traversed by the underground tunnels, viz:
Petitioner contends that the underground tunnels in
this case constitute an easement upon the property of the
respondents which does not involve any loss of title or
possession. The manner in which the easement was created
by petitioner, however, violates the due process rights of
respondents as it was without notice and indemnity to them
and did not go through proper expropriation proceedings.
Petitioner could have, at any time, validly exercised the
power of eminent domain to acquire the easement over
respondents property as this power encompasses not only the
taking or appropriation of title to and possession of the
expropriated property but likewise covers even the
imposition of a mere burden upon the owner of the
condemned property. Significantly, though, landowners
cannot be deprived of their right over their land until
expropriation proceedings are instituted in court. The court
must then see to it that the taking is for public use, that there
is payment of just compensation and that there is due process
of law.177[34]
3.
NPCs construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation
The Court held in National Power Corporation v. Ibrahim that NPC was
In disregarding this procedure and failing to recognize
respondents ownership of the sub-terrain portion, petitioner
took a risk and exposed itself to greater liability with the
passage of time. It must be emphasized that the acquisition of
the easement is not without expense. The underground
tunnels impose limitations on respondents use of the
property for an indefinite period and deprive them of its
ordinary use. Based upon the foregoing, respondents are
clearly entitled to the payment of just compensation.
Notwithstanding the fact that petitioner only occupies the
sub-terrain portion, it is liable to pay not merely an
easement fee but rather the full compensation for land. This
is so because in this case, the nature of the easement
practically deprives the owners of its normal beneficial use.
Respondents, as the owner of the property thus
expropriated, are entitled to a just compensation which
should be neither more nor less, whenever it is possible to
make the assessment, than the money equivalent of said
property.178[35]
 Here, like in National Power Corporation v. Ibrahim, NPC constructed a
tunnel underneath the land of the Heirs of Macabangkit without going
through formal expropriation proceedings and without procuring their
consent or at least informing them beforehand of the construction. NPCs
construction adversely affected the owners rights and interests because the
subterranean intervention by NPC prevented them from introducing any
developments on the surface, and from disposing of the land or any portion
of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the
owners to just compensation?
We agree with both the RTC and the CA that there was a full taking
on the part of NPC, notwithstanding that the owners were not completely and
actually dispossessed. It is settled that the taking of private property for public
use, to be compensable, need not be an actual physical taking or
appropriation. 179 [36] Indeed, the expropriators action may be short of
acquisition of title, physical possession, or occupancy but may still amount to
a taking. 180 [37] Compensable taking includes destruction, restriction,
diminution, or interruption of the rights of ownership or of the common and
necessary use and enjoyment of the property in a lawful manner, lessening or
destroying its value.181[38] It is neither necessary that the owner be wholly
deprived of the use of his property,182[39] nor material whether the property
is removed from the possession of the owner, or in any respect changes
hands.183[40]
As a result, NPC should pay just compensation for the entire land. In
that regard, the RTC pegged just compensation at P500.00/square meter based
on its finding on what the prevailing market value of the property was at the
time of the filing of the complaint, and the CA upheld the RTC.
We affirm the CA, considering that NPC did not assail the valuation
in the CA and in this Court. NPCs silence was probably due to the correctness
of the RTCs valuation after careful consideration and weighing of the parties
evidence, as follows:
The matter of what is just compensation for these
parcels of land is a matter of evidence. These parcels of land
is (sic) located in the City of Iligan, the Industrial City of the
South. Witness Dionisio Banawan, OIC- City Assessors
Office, testified, Within that area, that area is classified as
industrial and residential. That plaintiffs land is adjacent to
many subdivisions and that is within the industrial
classification. He testified and identified Exhibit AA and AA-
1, a Certification, dated April 4, 1997, showing that the
appraised value of plaintiffs land ranges from P400.00 to
P500.00 per square meter (see, TSN, testimony of Dionisio
Banawan, pp. 51, 57, and 71, February 9, 1999). Also, witness
Banawan, testified and identified Two (2) Deeds of Sale,
marked as Exhibit AA-2 and AA-3,[] showing that the
appraised value of the land adjoining or adjacent to plaintiff
land ranges from P700.00 to P750.00 per square meter. As
between the much lower price of the land as testified by
defendants witness Gregorio Enterone, and that of the City
Assessor of Iligan City, the latter is more credible.
Considering however, that the appraised value of the land in
 the area as determined by the City Assessors Office is not
uniform, this Court, is of the opinion that the reasonable
amount of just compensation of plaintiffs land should be fixed
at FIVE HUNDRED (500.00) PESOS, per square meter.
xxx.184[41]
The RTC based its fixing of just compensation ostensibly on the
prevailing market value at the time of the filing of the complaint, instead of
reckoning from the time of the taking pursuant to Section 3(h) of Republic Act
No. 6395. The CA did not dwell on the reckoning time, possibly because NPC
did not assign that as an error on the part of the RTC.
We rule that the reckoning value is the value at the time of the filing
of the complaint, as the RTC provided in its decision. Compensation that is
reckoned on the market value prevailing at the time either when NPC entered
or when it completed the tunnel, as NPC submits, would not be just, for it
would compound the gross unfairness already caused to the owners by NPCs
entering without the intention of formally expropriating the land, and without
the prior knowledge and consent of the Heirs of Macabangkit. NPCs entry
denied elementary due process of law to the owners since then until the owners
commenced the inverse condemnation proceedings. The Court is more concerned
with the necessity to prevent NPC from unjustly profiting from its deliberate
acts of denying due process of law to the owners. As a measure of simple
justice and ordinary fairness to them, therefore, reckoning just compensation
on the value at the time the owners commenced these inverse condemnation
proceedings is entirely warranted.
In National Power Corporation v. Court of Appeals,185[42] a case that
involved the similar construction of an underground tunnel by NPC without
the prior consent and knowledge of the owners, and in which we held that the
basis in fixing just compensation when the initiation of the action preceded the
entry into the property was the time of the filing of the complaint, not the time
of taking,186[43] we pointed out that there was no taking when the entry by
NPC was made without intent to expropriate or was not made under warrant
or color of legal authority.
4.
Awards for rentals, moral damages, exemplary
damages, and attorneys fees are deleted
for insufficiency of factual and legal bases
The CA upheld the RTCs granting to the Heirs of Macabangkit of
rentals of P 30,000.00/month from 1979 up to July 1999 with 12% interest per
annum by finding NPC guilty of bad faith in taking possession of the land to
construct the tunnel without their knowledge and consent.
Granting rentals is legally and factually bereft of justification, in light
of the taking of the land being already justly compensated. Conformably with
the ruling in Manila International Airport Authority v. Rodriguez,187[44] in which
the award of interest was held to render the grant of back rentals unwarranted,
we delete the award of back rentals and in its place prescribe interest of 12%
interest per annum from November 21, 1997, the date of the filing of the
complaint, until the full liability is paid by NPC. The imposition of interest of
12% interest per annum follows a long line of pertinent jurisprudence, 188[45]
whereby the Court has fixed the rate of interest on just compensation at 12%
per annum whenever the expropriator has not immediately paid just
compensation.
The RTC did not state any factual and legal justifications for awarding
to the Heirs of Macabangkit moral and exemplary damages each in the
amount of P200,000.00. The awards just appeared in the fallo of its decision.
Neither did the CA proffer any justifications for sustaining the RTC on the
awards. We consider the omissions of the lower courts as pure legal error that
we feel bound to correct even if NPC did not submit that for our consideration.
There was, to begin with, no factual and legal bases mentioned for the awards.
It is never trite to remind that moral and exemplary damages, not by any
means liquidated or assessed as a matter of routine, always require evidence
that establish the circumstances under which the claimant is entitled to them.
Moreover, the failure of both the RTC and the CA to render the factual and
legal justifications for the moral and exemplary damages in the body of their
decisions immediately demands the striking out of the awards for being in
violation of the fundamental rule that the decision must clearly state the facts
and the law on which it is based. Without the factual and legal justifications,
the awards are exposed as the product of conjecture and speculation, which
have no place in fair judicial adjudication.
We also reverse and set aside the decree of the RTC for NPC to pay to
the Heirs of Macabangkit the sum equivalent to 15% of the total amount
awarded, as attorneys fees, and to pay the cost. The body of the decision
did not state the factual and legal reasons why NPC was liable for
attorneys fees. The terse statement found at the end of the body of the
RTCs decision, stating: xxx The contingent attorneys fee is hereby reduced
from 20% to only 15% of the total amount of the claim that may be
awarded to plaintiffs, without more, did not indicate or explain why and
how the substantial liability of NPC for attorneys fees could have arisen
and been determined.
In assessing attorneys fees against NPC and in favor of the
respondents, the RTC casually disregarded the fundamental distinction
between the two concepts of attorneys fees the ordinary and the
extraordinary. These concepts were aptly distinguished in Traders Royal
Bank Employees Union-Independent v. NLRC,189[46] thuswise:
There are two commonly accepted concepts of
attorneys fees, the so-called ordinary and extraordinary. In its
ordinary concept, an attorneys fee is the reasonable
compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his
agreement with the client.
In its extraordinary concept, an attorneys fee is an
indemnity for damages ordered by the court to be paid by the
losing party in a litigation. The basis of this is any of the cases
provided by law where such award can be made, such as
those authorized in Article 2208, Civil Code, and is payable
not to the lawyer but to the client, unless they have agreed
that the award shall pertain to the lawyer as additional
compensation or as part thereof.
By referring to the award as contingency fees, and reducing the
award from 20% to 15%, the RTC was really referring to a supposed
agreement on attorneys fees between the Heirs of Macabangkit and their
counsel. As such, the concept of attorneys fees involved was the ordinary.
Yet, the inclusion of the attorneys fees in the judgment among the
liabilities of NPC converted the fees to extraordinary. We have to disagree
with the RTC thereon, and we express our discomfort that the CA did not legal matters like this one even if not specifically raised or assigned as
do anything to excise the clearly erroneous and unfounded grant. error by the parties.

An award of attorneys fees has always been the exception rather 5.

than the rule. To start with, attorneys fees are not awarded every time a
party prevails in a suit.190[47] Nor should an adverse decision ipso facto Attorneys fees under quantum meruit principle
justify an award of attorneys fees to the winning party.191[48] The policy
of the Court is that no premium should be placed on the right to are fixed at 10% of the judgment award
litigate.192[49] Too, such fees, as part of damages, are assessed only in the
instances specified in Art. 2208, Civil Code.193[50] Indeed, attorneys fees
are in the nature of actual damages.194[51] But even when a claimant is
compelled to litigate with third persons or to incur expenses to protect his
rights, attorneys fees may still be withheld where no sufficient showing of
bad faith could be reflected in a partys persistence in a suit other than an Based on the pending motions of Atty. Macarupung Dibaratun and
erroneous conviction of the righteousness of his cause.195[52] And, lastly, Atty. Manuel D. Ballelos to assert their respective rights to attorneys fees, both
the trial court must make express findings of fact and law that bring the contending that they represented the Heirs of Macabangkit in this case, a
suit within the exception. What this demands is that the factual, legal or conflict would ensue from the finality of the judgment against NPC.
equitable justifications for the award must be set forth

A look at the history of the legal representation of the Heirs of

not only in the fallo but also in the text of the decision, or else, the award Macabangkit herein provides a helpful predicate for resolving the conflict.
should be thrown out for being speculative and conjectural.196[53]

Sound policy dictates that even if the NPC failed to raise the issue
of attorneys fees, we are not precluded from correcting the lower courts Atty. Dibaratun was the original counsel of the Heirs of Macabangkit.
patently erroneous application of the law.197[54] Indeed, the Court, in When the appeal was submitted for decision in the CA,198[55] Atty. Ballelos
supervising the lower courts, possesses the ample authority to review filed his entry of appearance,199[56] and a motion for early decision.200[57]
Atty. Ballelos subsequently filed also a manifestation,201[58] supplemental
manifestation,202[59]
reply, 203 [60] and ex parte motion reiterating the motion for early
decision.204[61] It appears that a copy of the CAs decision was furnished
solely to Atty. Ballelos. However, shortly before the rendition of the decision,
Atty. Dibaratun filed in the CA a motion to register attorneys lien,205[62]
alleging that he had not withdrawn his appearance and had not been aware of
the entry of appearance by Atty. Ballelos. A similar motion was also received
by the Court from Atty. Dibaratun a few days after the petition for review was
filed. 206 [63] Thus, on February 14, 2005, 207 [64] the Court directed Atty.
Dibaratun to enter his appearance herein. He complied upon filing the
comment.208[65]
Amir Macabangkit confirmed Atty. Dibaratuns representation
through an ex parte manifestation that he filed in his own behalf and on behalf
of his siblings Mongkoy and Putri.209[66] Amir reiterated his manifestation
on March 6, 2006,210[67] and further imputed malpractice to Atty. Ballelos for
having filed an entry of appearance bearing Amirs forged signature and for
plagiarism, i.e., copying verbatim the arguments contained in the pleadings
previously filed by Atty. Dibaratun.211[68]
On September 11, 2008, Atty. Ballelos submitted two motions, to wit:
(a) a manifestation and motion authorizing a certain Abdulmajeed Djamla to
receive his attorneys fees equivalent of 15% of the judgment award,212[69]
and (b) a motion to register his attorneys lien that he claimed was
contingent.213[70]
Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement
to attorneys fees was contingent. Yet, a contract for a contingent fees is an
agreement in writing by which the fees, usually a fixed percentage of what may
be recovered in the action, are made to depend upon the success in the effort
to enforce or defend a supposed right. Contingent fees depend upon an
express contract, without which the attorney can only recover on the basis of
quantum meruit. 214 [71] With neither Atty. Dibaratun nor Atty. Ballelos
presenting a written agreement bearing upon their supposed contingent fees,
the only way to determine their right to appropriate attorneys fees is to apply
the principle of quantum meruit.
Quantum meruit literally meaning as much as he deserves is used as basis
for determining an attorneys professional fees in the absence of an express
agreement.215[72] The recovery of attorneys fees on the basis of quantum
meruit is a device that prevents an unscrupulous client from running away
with the fruits of the legal services of counsel without paying for it and also
avoids unjust enrichment on the part of the attorney himself. 216 [73] An
attorney must show that he is entitled to reasonable compensation for the
effort in pursuing the clients cause, taking into account certain factors in fixing f) The customary charges for similar services and
the amount of legal fees.217[74] the schedule of fees of the IBP chapter to which he belongs;

Rule 20.01 of the Code of Professional Responsibility lists the guidelines g) The amount involved in the controversy and the
for determining the proper amount of attorney fees, to wit: benefits resulting to the client from the service;

Rule 20.1 A lawyer shall be guided by the following

factors in determining his fees: h) The contingency or certainty of compensation;

a) The time spent and the extent of the services

rendered or required;
i) The character of the employment, whether
b) The novelty and difficult of the questions occasional or established; and
involved;

j) The professional standing of the lawyer.

c) The important of the subject matter;

In the event of a dispute as to the amount of fees between the attorney

d) The skill demanded; and his client, and the intervention of the courts is sought, the determination
requires that there be evidence to prove the amount of fees and the extent and
value of the services rendered, taking into account the facts determinative
thereof.218[75] Ordinarily, therefore, the determination of the attorneys fees
e) The probability of losing other employment as a on quantum meruit is remanded to the lower court for the purpose. However,
result of acceptance of the proffered case; it will be just and equitable to now assess and fix the attorneys fees of both
attorneys in order that the resolution of a comparatively simple controversy,
as Justice Regalado put it in Traders Royal Bank Employees Union-Independent v.
NLRC, 219 [76] would not be needlessly prolonged, by taking into due
consideration the accepted guidelines and so much of the pertinent data as are
extant in the records.
Atty. Dibaratun and Atty. Ballelos each claimed attorneys fees
equivalent to 15% of the principal award of P113,532,500.00, which was the
amount granted by the RTC in its decision. Considering that the attorneys fees
will be defrayed by the Heirs of Macabangkit out of their actual recovery from
NPC, giving to each of the two attorneys 15% of the principal award as
attorneys fees would be excessive and unconscionable from the point of view
of the clients. Thus, the Court, which holds and exercises the power to fix
attorneys fees on a quantum meruit basis in the absence of an express written
agreement between the attorney and the client, now fixes attorneys fees at 10%
of the principal award of P113,532,500.00.
Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should
receive attorneys fees from the Heirs of Macabangkit is a question that the
Court must next determine and settle by considering the amount and quality
of the work each performed and the results each obtained.
Atty. Dibaratun, the attorney from the outset, unquestionably carried
the bulk of the legal demands of the case. He diligently prepared and timely
filed in behalf of the Heirs of Macabangkit every pleading and paper necessary
in the full resolution of the dispute, starting from the complaint until the very
last motion filed in this Court. He consistently appeared during the trial, and
examined and cross-examined all the witnesses presented at that stage of the
proceedings. The nature, character, and substance of each pleading and the
motions he prepared for the Heirs of Macabangkit indicated that he devoted
substantial time and energy in researching and preparing the case for the trial.
He even advanced P250,000.00 out of his own pocket to defray expenses from
the time of the filing of the motion to execute pending appeal until the case
reached the Court.220[77] His representation of all the Heirs of Macabangkit
was not denied by any of them.
We note that Atty. Dibaratun possessed some standing in the legal
profession and in his local community. He formerly served as a member of the
Board of Director of the Integrated Bar of the Philippines (IBP), Lanao del
Norte-Iligan City Chapter, and was an IBP national awardee as Best Legal Aid
Committee Chairman. He taught at Mindanao State University College of Law
Extension. He was a Municipal Mayor of Matungao, Lanao del Norte, and was
enthroned Sultan a Gaus.
In contrast, not much about the character and standing of Atty.
Ballelos, as well as the nature and quality of the legal services he rendered for
the Heirs of Macabangkit are in the records. The motions he filed in the
Court and in the CA lacked enlightening research and were insignificant to
the success of the clients cause. His legal service, if it can be called that,
manifested no depth or assiduousness, judging from the quality of the
pleadings from him. His written submissions in the case appeared either to
have been lifted verbatim from the pleadings previously filed by Atty.
Dibaratun, or to have been merely quoted from the decisions and resolutions
of the RTC and the CA. Of the Heirs of Macabangkit, only Cebu, Batowa-an,
Sayana, Nasser, Manta, Mongkoy221[78] and Edgar gave their consent to Atty.
Ballelos to appear in their behalf in the CA, which he did despite Atty.
Dibaratun not having yet filed any withdrawal of his appearance. The Court
did not receive any notice of appearance for the Heirs of Macabangkit from
Atty. Ballelos, but that capacity has meanwhile become doubtful in the face of
Amirs strong denial of having retained him.

In fairness and justice, the Court accords full recognition to Atty.
Dibaratun as the counsel de parte of the Heirs of Macabangkit who discharged
his responsibility in the prosecution of the clients cause to its successful end.
It is he, not Atty. Ballelos, who was entitled to the full amount of attorneys fees
that the clients ought to pay to their attorney. Given the amount and quality
of his legal work, his diligence and the time he expended in ensuring the
success of his prosecution of the clients cause, he deserves the recognition,
notwithstanding that some of the clients might appear to have retained Atty.
Ballelos after the rendition of a favorable judgment.222[79]
Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser,
Manta and Edgar, the only parties who engaged him. The Court considers his
work in the case as very minimal. His compensation under the quantum meruit
principle is fixed at P5,000.00, and only the Heirs of Macabangkit earlier
named are liable to him.
(b) The awards of P30,000.00 as rental fee, P200,000.00 as
moral damages, and P200,000.00 as exemplary damages
are DELETED; and
(c) The award of 15% attorneys fees decreed to be paid by
National Power Corporation to the Heirs of Macabangkit
is DELETED.
The Court PARTLY GRANTS the motion to register attorneys lien
filed by Atty. Macarupung Dibaratun, and FIXES Atty. Dibaratuns attorneys
fees on the basis of quantum meruit at 10% of the principal award of
P113,532,500.00.
The motion to register attorneys lien of Atty. Manuel D. Ballelos is
PARTLY GRANTED, and Atty. Ballelos is DECLARED ENTITLED TO
RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all
surnamed Macabangkit, the amount of P5,000.00 as attorneys fees on the basis
of quantum meruit.

WHEREFORE, the Court AFFIRMS the decision promulgated on

October 5, 2004 by the Court of Appeals, subject to the following
MODIFICATIONS, to wit:

(a) Interest at the rate of 12% per annum is IMPOSED on the

principal amount of P113,532,500.00 as just
compensation, reckoned from the filing of the complaint
on November 21, 1997 until the full liability is paid;
Costs of suit to be paid by the petitioner.

SO ORDERED.
Republic of the Philippines Sometime in 2000, petitioner National Power Corporation (NPC) filed Civil
SUPREME COURT Case No. 5785 with the Batangas City RTC, seeking to expropriate portions of
Manila Tarcelo and the Santos heirs lots to the extent of 1,595.91 square meters which
are affected by the construction and maintenance of NPCs 1,200 MW Ilijan
SECOND DIVISION Natural Gas Pipeline Project. In other words, NPCs natural gas pipeline shall
traverse respondents lands to such extent.
G.R. No. 198139 September 8, 2014
On July 29, 2002, the Batangas City RTC issued an order of condemnation, thus
NATIONAL POWER CORPORATION, Petitioner, authorizing NPC to take possessionof the subject lots. Thereafter, it appointed
vs. three commissioners who in turn submitted their respective Reports5 and
FELICISIMO TARCELO and HEIRS OF COMIA SANTOS, Respondents. recommendations on the amount of just compensation to be paid to
respondents.
DECISION
On November 7, 2005, the Batangas City RTC rendered a Decision6 fixing just
DEL CASTILLO, J.: compensation for the subject lots at P1,000.00 per square meter, thus:

Execution must always conform to that decreed in the dispositive part of the
decision, because the only portion thereof that may be the subject of execution
is that which is precisely ordained or decreed in the dispositive portion;
whatever is in the body of the decision can only be considered as part of the
reasons or conclusions and serves as a guide in determining the ratio
decidendi.1
In the Commissioners Report filed by Chairman of the Board Emelinda C.
Atienza, she recommended x x x the amount of P1,120.00 per square meter as
just compensation for the properties involvedin this case. She based her
findings on the following:
Property of Felicisimo Tarcelo7

This Petition for Review on Certiorari2 seeks to set aside the January 20, 2011 1. The subject property is classified as agricultural land;
Decision3 of the Court of Appeals (CA) and August 9, 2011 Resolution4 in CA-
G.R. SP No. 112054, which denied the herein petitioner's Petition for Certiorari 2. It is approximately 420 meters away from Shell Refinery and
and Motion for Reconsideration, respectively, thus affirming the dispositions approximately 40 meters away from the Barangay Road;
of the Regional Trial Court of Batangas City, Branch VII (Batangas City RTC)
in Civil Case No. 5785. 3. Adjoining boundary owners property [sic] are also classified as
agricultural lands.
Factual Antecedents
Property of the Heirs of Santos Comia8
Civil Case No. 5785
1. The subject property is classified as agricultural land;
Respondents Felicisimo Tarcelo (Tarcelo) and the heirs of Comia Santos
(Santos heirs) are the owners of two lots measuring 4,404 and 2,611 square 2. It is approximately 560 meters away from Shell Refinery and
meters, respectively, which are situated in Brgy. Tabangao-Ambulong, approximately 140 meters away from the Barangay Road;
Batangas City.
 3. Adjoining boundary owners property [sic] are also classified as
agricultural lands.
Commissioners Alberto M. Nuique and Eladio Taupa of the National Power
Corporation (NPC) also submitted their own Commissioners Report. They
recommended that the amount of P475.00 per square meter be made as the
payment of the affected portion of the subject property which is 10% of the fair
market value pursuant to Republic Act No. 6395 as amended. Commissioners
Taupa and Nuique recommended the amount of P475.00 per square meter
because only a right-of-way easement will be acquired. According to the
Supreme Court in the case of NPC v. Manubay Agro Industrial Dev. Corp.,
G.R. No. 150936, August 18, 2004, even if what is acquired is only an easement
of right of way, still, the plaintiff should pay the full value of the property and
not a mere easement fee.
Based on the foregoing, the court fixes the just compensation for the subject
properties situated in Brgy. Tabangao-Ambulong, Batangas City at ONE
THOUSAND PESOS (P1,000.00)per square meter.
WHEREFORE, plaintiff National Power Corporation is ordered to pay the
defendants the amount of P1,000.00 per square meter.
Upon payment of just compensation to the defendants, subject to the
deductions of the sums due the Government for unpaid real estate taxes and
other imposts, the plaintiff shall have a lawful right to enter, take possession
and acquire easement of right-of-way over the portions of the properties
together with the improvements sought to be expropriated for the purpose
stated, free from any and all liens and encumbrances.
Finally, the plaintiff is directed topay the corresponding Commissioners fees
per meeting or the following sums:
Chairman Emelinda C. Atienza - P1,000.00
Members Alberto M. Nuique - P 800.00
and Eladio Taupa - P 800.00
SO ORDERED.9
CA-G.R. CV No. 86712
NPC filed an appeal docketed as CA-G.R. CV No. 86712 with the CA. On
June 26, 2007, the appellate court issued a Decision,10 stating as follows:
At bar, it cannot be gainsaid thatthe construction of underground pipeline is
a simple case ofmere passage of gas pipeline. It will surely cause damage and
prejudice to the agricultural potentials of appellees property. Deep excavation
will have to be done whereby plants and trees will be uprooted. A possible
leakage could certainly do harm and adversely restrict the agricultural and
economic activity of the land. This is not to mention that it will create an
environmental health hazard dangerous to the occupants life and limb.
Hence, defendants-appellees are entitled for [sic] justcompensation to [sic] the
fullmarket value of their property notjust ten percent (10%) of it.
xxxx
Taking all the consideration [sic] of the subject property, Commissioners
Taupa and Nuique placed the value of the property at P475.00 per square
meter based on the Land Bank valuation and Cuervo Appraisers, Inc. and the
Provincial/City Appraisal Committees of Batangas, Laguna and Lipa City,
while Commissioner Atienza valued the property at P1,120.00 per square
meter, based on the average value per findings of the Committee composed of
the City Assessor, City Treasurer, City Engineer under Resolution No. 9-99
dated June 18, 1999 that the subject property will cost P1,000.00 to P1,300.00
per square meter, and the opinion value of her Teams survey and Report
which revealed that the prevailing price of agricultural land in Tabangao-
Ambulong, Batangas City is NINE HUNDRED THIRTY PESOS (P930.00) per
square meter.
In pronouncing the just compensation in this case, We fix the rate of the subject
property at SEVEN HUNDREDNINETY SEVEN [sic] and FIFTY CENTAVOS
(P797.50) per square meter by averaging P475.00 and P1,120.00 of the
commissioners report. This is nearest to and in consonance with the ruling
that in expropriation proceedings, the owner of the property condemned is
generally entitled to the fair market value, that is the sum of money which a
person desirous but not compelled to buy, and an owner willing but not
compelled to sell.
IN VIEW OF ALL THE FOREGOING, appealed decision dated November 7,
2005 is AFFIRMEDwith MODIFICATIONthat the just compensation in this
case is lowered from ONE THOUSAND PESOS (P1,000.00) to SEVEN
HUNDRED NINETY SEVEN and FIFTY CENTAVOS (P797.50) per square
meter. No pronouncement as to costs.
SO ORDERED.11
The above Decision ofthe appellate court became final and executory, and
entry of judgment was done accordingly.12
Respondents moved for execution.13 In a March 6, 2009 Order,14 the Batangas
City RTC granted their respective motions, and a Writ of Execution15 was
issued.
On May 14, 2009, a Notice of Garnishment16 was served on the Manager of
the Land Bank of the Philippines, NPC Branch, Quezon City for the
satisfaction of the amount of P5,594,462.50 representing justcompensation for
the wholeof respondents 4,404- and 2,611-square meter lots or 7,015 square
meters and not merely the supposedly affected portions thereof totaling
1,595.91 square meters as NPC originally sought to acquire.
On May 29, 2009, NPC filed an Urgent Omnibus Motion17 seeking to quash
the Writ of Execution and Notice of Garnishment, which it claimed were
inconsistent with the Batangas City RTCs November 7, 2005 Decision and the
CAs June 26, 2007 Decision in CA-G.R. CV No. 86712 where just
compensation was fixed at P1,000.00 per square meter only for the affected
area of 1,591.91 square meters, and not for the whole of respondents
respective lots. It argued that the appeal in CA-G.R. CV No. 86712 resolved
only the issue of whether respondents should be paid the full marketvalue of
the affected 1,595.91-square meter area or just a 10% easement fee therefor; it
did not decide whether NPC should pay just compensation for the entire area
of 7,015 square meters.
On September 24, 2009,the Batangas City RTC issued an Order18 denying
NPCs Urgent Omnibus Motion, declaring that
The cases cited by plaintiff are not in point. These cases involved either the
construction and maintenance of electric transmission lines x x x or the
widening of road component x x x. None of the cited cases involved
underground natural gas pipelines, as in this case. It does not take an expert
to be able to infer that there is a world of difference on the probable effects of
the two (2) kinds of projects on the properties upon which these are imposed.
In the case of transmission lines, the NPC imposes a limitation on the property
owners use of their property in that below said transmission lines no plant
higher than three (3) meters is planted. In the case of underground pipelines,
similar, if not more burdensome restrictions, are imposed for the reason that
the ground under which the natural gas pipelines are located could not be
cultivated in view of the dangers that might result from accidental injury or
damage to the pipelines.
Moreover, there is the possible inestimable damage that an unpredictable
natural disaster such as an earthquake of tectonic origin, the precise date and
time of occurrence of which are yet beyond the powers of man to accurately
foretell, could inflict on the underground natural gas pipelines and
consequently, on all things, living and non-living, that exist in the vicinity of
the defendants properties.
Moreover, the ruling that just compensation should be paid for the entire area
of the owners property and not justthe affected portion thereof is not without
precedent. In NPC vs. Court of Appeals (436 SCRA 195, 201 [August 12, 2001]),
the Supreme Court [noted] that "Pobres property suffered permanent injury
because of the noise, water, air, and land pollution generated by NPCs
geothermal plants[; t]he construction and operation of the geothermal plants
drastically changed the topography of the property making it no longer viable
as a resort-subdivision[; and t]he chemicals emitted by the geothermal plants
damaged the natural resources in the property and endangered the lives of the
residents. Accordingly, the Supreme Court held that "NPC did not only take
the 8,311.60 square meter portion of the property but also the remaining area
of the 68,969 square-meter property. NPC had rendered Pobres entire
property useless as a resort-subdivision. The property has become useful only
to NPC. NPC must therefore take Pobres entire property and pay for it. x x x
In the case at bar, it was not disputed that the subject properties are
agricultural lands. In order to be usefulto its owners, suchagricultural lands
must be cultivated to yield a harvest ofagricultural produce. But when such
lands are burdened with an easement even of the non-apparent kind, but
which to all intents and purposes restrict, nay, preclude the very activity that
would render it useful to its owners because the existence of such easement
poses an undeniable danger to the life and limb of the occupants, then such
lands cease to be useful to the property owners and useful only to the entity
that imposed the easement upon the land. The Honorable Court of Appeals
recognized this fact when it declared that:
"At bar, it cannot be gainsaid that the construction of underground pipeline is
a simple case of mere passage of gas pipeline. It will surely causedamage and
prejudice to the agricultural potentials of appellees property. Deep excavation
will have to be done whereby plants and trees will be uprooted. A possible
leakage could certainly do harm and adversely restrict the agricultural and
economic activityof the land. This is not to mention that it will create
anenvironmental health hazard dangerous to the occupants life and limb.
Hence, defendants-appellees are entitled for [sic] just compensation to the full
market value of their property not just ten percent of it.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. The measure is not the takers gain,
but the owners loss." x x x
Thus, the argument of defendant heirs of Santos Comia is well taken that as to
them, the entire area of their property, and not just the affected portion thereof,
had become useless to them. It is [useful only] to plaintiff NPC. The same holds
true for the entire property owned by defendant Felicisimo Tarcelo. Therefore,
NPC must pay for the full market value of the entire properties owned by
defendant Felicisimo Tarcelo and defendant heirs of Santos Comia.
WHEREFORE, the Omnibus Motion is DENIED. As the Writ of Execution
dated March 9, 2009 and Notice ofGarnishment dated May 14, 2009 are
consistent with the Decision of the Court of Appeals dated June 28, 2007, this
Courts Sheriff is hereby ordered to forthwith enforce the Writ of Execution
dated March 9, 2009 and Notice of Garnishment dated May 14, 2009 and to
submit immediately a written report on his proceedings thereon.
SO ORDERED.19
NPC filed a Motion for Reconsideration,20 which was deniedin an October 23,
2009 Order21 on the ground that it did not contain a notice of hearing and was
thus a mere scrap of paper that did not toll the running of the period to appeal
and therefore rendered the Batangas City RTCs September 24, 2009 Order
final and executory.
Ruling of the Court of Appeals
Seeking to set aside the September 24, 2009 and October 23, 2009 Orders of the
Batangas City RTC as well as itsMarch 9, 2009 Writ ofExecution and May 14,
2009 Notice of Garnishment, NPC filed a Petition for Certiorari22 with the CA,
which was docketed as CA-G.R. SP No. 112054. It pleaded liberality in the
application of the rule on motions and insisted that the assailed writ of
execution and notice of garnishment were inconsistent with the CAs June 26,
2007 Decision in CA-G.R. CV No. 86712 in which just compensation was fixed
at P1,000.00 per square meter only for the affected area of 1,595.91 square
meters, and not for the whole of respondents respective lots. It reiterated that
since the trial courts dispositions were irregular and inconsistent with the
Decision in CA-G.R. CV No. 86712, justice dictated that the technical rules on
motions should give way to considerations of equity; that in CA-G.R. CV No.
86712, the only question that had to be resolved was whether NPC should pay
the full market value of the 1,595.91-square meter affectedarea or merely a 10%
easement fee for the use thereof and not whether it should pay for the entire
7,015 square meters owned by respondents. Finally, it maintained that the
inclusion of the whole property instead of only the affected portions thereof
would render the execution process in Civil Case No. 5785 unjust and
inequitable.
On January 20, 2011, the CA rendered the assailed Decision containing the
following decretal portion:
WHEREFORE, the instant petition for certiorari is DENIED. Accordingly, the
assailed Orders of the public respondent Regional Trial Court of Batangas
City, in Civil Case No. 5785, STAND. SO ORDERED.23
The CA held that there was nothing in the November 7, 2005 Decision of the
Batangas City RTC to indicate thatNPC was being ordered to pay just
compensation only for the 1,595.91-square meter portion ofrespondents
properties; on the contrary, the trial court held that
Based on the foregoing, the court fixes the justcompensation for the subject
propertiessituated in Brgy. Tabangao-Ambulong, Batangas City at ONE
THOUSAND PESOS (P1,000.00) per square meter.24 (Emphasis supplied)
which meant that in the fixing of the amount of just compensation, the trial
court did not confine itself to the 1,595.91-square meter portion but ratherto
the subject properties in their entirety and without qualification. It added that
the trial courts citation of National Power Corporation v. Manubay Agro-
Industrial Development Corporation25 strengthened the view that the trial
court intended for respondents to be paid compensation for the whole of their
properties,as it was held in said cited case that just compensation should be
"neither morenor less than the monetary equivalent of the land;"26 the trial
courts judgment may be clarified by referring to other portions thereof, and
not by reading them separately from the whole decision in other words, the
"decision should be taken as a whole and considered in its entirety to get the
truemeaning and intent of any particular portion thereof."27
The CA noted that even in the June 26, 2007 Decision inCA-G.R. CV No. 86712,
it was acknowledged that
At bar, it cannot be gainsaid thatthe construction of underground pipeline is
a simple case of mere passage of gas pipeline. It will surely cause damage and
prejudice to the agricultural potentials of appellees property. Deep excavation
will have to be done whereby plants and trees will be uprooted. A possible
leakage could certainly do harm and adversely restrict the agricultural and
economic activity of the land. This is not to mention that it will create an
environmental health hazard dangerous to the occupants life and limb.
Hence, defendants-appellees are entitled for [sic] justcompensation to [sic] the
fullmarket value of their property not just ten percent (10%) of it.28
It added that in the September 24, 2009 Order of the BatangasCity RTC, it was
made clear that NPC should pay for the entire area of respondents properties,
and not just the affectedportions thereof when it held that
x x x. In the case of underground pipelines, similar, if not more burdensome
restrictions, are imposed for the reason that the ground under which the
natural gas pipelines are located could not be cultivated in view of the dangers
that might result from accidental injury or damage to the pipelines. Moreover,
there is the possible inestimable damage that an unpredictable natural disaster
such as an earthquake of tectonic origin, the precise date and time of
occurrence of which are yet beyond the powers of man to accurately foretell,
could inflict on the underground natural gas pipelines and consequently, on
all things, living and non-living, that exist in the vicinity of the defendants
properties.
Moreover, the ruling that just compensation should be paid for the entire area
of the owners property and not justthe affected portion thereof is not without
precedent. In NPC vs. Court of Appeals (436 SCRA 195, 201 [August 12, 2001]),
the Supreme Court [noted] that "Pobres property suffered permanent injury
because of the noise, water, air, and land pollution generated by NPCs
geothermal plants[; t]he construction and operation of the geothermal plants
drastically changed the topography of the property making it no longer viable
as a resort-subdivision[; and t]he chemicals emitted by the geothermal plants
damaged the natural resources in the property and endangered the lives of the
residents. Accordingly, the Supreme Court held that "NPC did not only take
the 8,311.60 square meter portion of the property but also the remaining area
of the 68,969 square-meter property. NPC had rendered Pobres entire
property useless as a resort-subdivision. The property has become useful only
to NPC. NPC must therefore take Pobres entire property and pay for it. x x x
In the case at bar, it was not disputed that the subject properties are
agricultural lands. In order to be usefulto its owners, suchagricultural lands
must be cultivated to yield a harvest ofagricultural produce. But when such
lands are burdened with an easement even of the non-apparent kind, but
which to all intents and purposes restrict, nay, preclude the very activity that
would render it useful to its owners because the existence of such easement
poses an undeniable danger to the life and limb of the occupants, then such
lands cease to be useful to the property owners and useful only to the entity
that imposed the easement upon the land. The Honorable Court of Appeals
recognized this fact when it declared that:
"At bar, it cannot be gainsaid that the construction of underground pipeline is
a simple case of mere passage of gas pipeline.1wphi1 It will surely
causedamage and prejudice to the agricultural potentials of appellees
property. Deep excavation will have to be done whereby plants and trees will
be uprooted. A possible leakage could certainly do harm and adversely restrict
the agricultural and economic activityof the land. This is not to mention that
it will create an environmental health hazard dangerous to the occupants life
and limb.
Hence, defendants-appellees are entitled for (sic) just compensation to [sic] the
full market value of their property not just ten percent of it.29
Finally, the CA found nothing wrong with the trial courts October 23, 2009
Order denying NPCs Motion for Reconsideration (of the trial courts
September 24, 2009 Order), since the saidmotion lacked the required notice of
hearing; it was properly treated as a pro formamotion, a mere scrap of paper,
and in the absence of merit and compelling reasons, the Rule pertaining to
motions may not be relaxed for NPCs benefit.
NPC filed its Motion for Reconsideration,30 which was denied by the
appellate court in an August 9, 2011 Resolution. Hence, the instant Petition.
Issues
The Petition is grounded on the following:
I beemitted by such pipelines; that their situation is akin tothat of the landowner
THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURTS
ORDERS APPROVING THE NOTICE OF GARNISHMENT WHICH
DEMANDED PAYMENT OF JUST COMPENSATION FOR THE ENTIRE
PROPERTY OF RESPONDENTS INSTEAD OF THE AFFECTED PORTIONS
ONLY INACCORDANCE WITHTHE COMPLAINT AND THE TRIAL
COURTS DECISION.
II
THE COURT OF APPEALS ERRED IN UPHOLDING THE ORDER OF THE
TRIAL COURT WHICH DENIEDPETITIONERS MOTION FOR
RECONSIDERATION IN COMPLETE DISREGARD OF LIBERALITY
ENUNCIATED IN SEVERAL DECISIONS OF THIS HONORABLE
COURT.31
Petitioners Arguments
In its Petition and Consolidated Reply,32 NPC argues that while there is no
dispute as to its liability torespondents, the Sheriffs computation as reflected
in the Notice of Garnishment is erroneous inthat it is being made to pay for
more than what was adjudged; justcompensation should be limited to the
value of that portion so taken, and not the entire property of which such
portion forms part. It cites cases where the computation and payment of just
compensation was limited to the value of the affected portions only.33 It
continues to plead for liberality in respect to its Motion for Reconsideration of
the trial courts September 24, 2009 Order, which was denied via the October
23, 2009 Order for lack of the required notice of hearing.
NPC thus prays that the assailed CA dispositions together with the
September 24, 2009 and October 23, 2009 Orders and the May 14, 2009 Notice
of Garnishment be set aside. Respondents Arguments
Praying that the Petition be denied for lack of merit, the Santos heirs in their
Comment34 restate the assailed CA Decision, and add that while NPC sought
a mere right-of-way for its pipelines, the truth is that their property will be
rendered useless by the toxic fumes and hazardous substances that could
in the case of National Power Corporation v. Manubay Agro-Industrial
Development Corporation,35 who was adjudged to be entitled to the full value
of the property, and not a mere easement fee; and thatNPC cannot claim
liberality in the application of the Rule on motions36 because there exist no
special or compelling circumstances to warrant the relaxation of the rule, and
NPCs failure is the result of fault and negligence on itspart, and it has not
shown to the satisfaction of the court that it is entitled to leniency.
On the other hand, respondent Tarcelo argues in his Comment37 that there is
no inconsistency between the trial courts November 7, 2005 Decision and the
June 26, 2007 Decision of the CA inCA-G.R. CV No. 86712 on the one hand,
and the trial courts September 24, 2009 and October 23, 2009 Orders and the
March 9, 2009 Writ of Execution and May 14, 2009 Notice of Garnishment on
the other; that the trial court and the CA treated respondents properties as a
whole or in their entirety in resolving the cases before them; thatNPC already
knew beforehand that it is being ordered to pay just compensation for the
entirety of respondents properties and not mere portionsthereof; and finally,
that the trial court correctly denied NPCs Motion for Reconsideration of the
September 24, 2009 Order for lack of a notice of hearing.
Our Ruling
The Court grants the Petition.
The exercise of the right of eminent domain, whether directly by the State or
by its authorized agents, is necessarily in derogation of private rights. It is one
of the harshest proceedings known to the law. x x x The authority to condemn
is to be strictly construed in favor of the owner and against the condemnor.
When the power is granted, the extent to which it may be exercised is limited
to the express terms or clear implication of the statute in which the grant is
contained.38
Corollarily, it has been held that trial courts should exercise care and
circumspection in the resolution of just compensation cases, considering that
they involve the expenditure of public funds.39
The above principles were somehow lost on both the trial and appellate courts.
The Commissioners Reports in Civil Case No. 5785 indicate that only the
affected areas were intended to beacquired and compensated. Thus,
Commissioner Emelinda C. Atienzas Report containsthe following
recommendation:
IV. Recommendation
Finding x x x that the valuation established herein was reasonable and fair, the
undersigned recommend [sic] thatthe amount of Php1,120.00 per square meter
be adopted to compensate the affected areas on the properties involve [sic] in
the above subject case.40 (Emphasis supplied)
On the other hand, Commissioners Alberto M. Nuique and Eladio R. Taupas
respective Reports uniformly state:
III. RECOMMENDATIONS
It is hereby recommended that only easement fee be made as the payment on
the affected portionof the above-mentioned parcel of agricultural land which
is 10% of the fair market value pursuant to Republic Act 6395 as amended x x
x41 (Emphasis supplied)
The trial court itself particularly decreed in its November 7, 2005 Decision that
only the affectedportions of respondents properties were to be acquired and
compensated for. In the decretal portion ofits Decision, it thus held as follows:
WHEREFORE, plaintiff National Power Corporation is ordered to pay the
defendants the amount of P1,000.00 per square meter.
Upon payment of just compensation to the defendants, subject to the
deductions of the sums due the Government for unpaid real estate taxes and
other imposts, the plaintiff shall have a lawful right to enter, take possession
and acquire easement of right-of-way over the portions of the
propertiestogether with the improvements sought to be expropriated for the
purpose stated, free from any and all liens and encumbrances.42 (Emphasis
and underscoring supplied)
The CA therefore patently erred in declaring in its assailed Decision that there
is nothing in the November 7, 2005 Decision of the Batangas City RTC to
indicate that NPC was being ordered to pay just compensation only for the
1,595.91-square meter portion of respondents properties.On the contrary, the
evidence is quite clear that NPC has beenmade liable precisely to such extent
only, and not more.
The Court likewise observes that contrary to the CAs appreciation, the June
26, 2007 Decision in CA-G.R. CV No. 86712 did notparticularly declare that
NPC should pay for the entirearea of respondents properties. It merely stated
that respondents should be compensated for the full and fair market value of
their property and not merely paid a 10%easement fee therefor; it did not
resolve the issue of whether NPC should pay just compensation for the entire
area of 7,015 square meters. It simply said that NPC should pay for the full
per-square meter value of the affected portions, and not just a fraction thereof
(or 10%). There could be no other interpretation of the June 26, 2007
pronouncement in CAG.R. CV No. 86712 when the CA stated therein that At
bar, it cannot be gainsaid thatthe construction of underground pipeline is a
simple case of mere passage of gas pipeline. It will surely cause damage and
prejudice to the agricultural potentials of appellees property. Deep excavation
will have to be done whereby plants and trees will be uprooted. A possible
leakage could certainly do harm and adversely restrict the agricultural and
economic activity of the land. This is not to mention that it will create an
environmental health hazard dangerous to the occupants life and limb.
Hence, defendants-appellees are entitled for (sic) just compensation to (sic) the
fullmarket value of their property notjust ten percent (10%) of it.
xxxx
Taking all the consideration [sic] ofthe subject property, Commissioners
Taupa and Nuique placed the value of the property at P475.00 per square
meter based on the Land Bank valuation and Cuervo Appraisers, Inc. and the
Provincial/City Appraisal Committees of Batangas, Laguna and Lipa City,
while Commissioner Atienza valued the property at P1,120 per square meter,
based on the average value per findings of the Committee composed of the
City Assessor, City Treasurer, City Engineer under Resolution No. 9-99 dated
June 18, 1999 that the subject property will cost P1,000.00 to P1,300.00 per
square meter, and the opinion value of her Teams surveyand Report which
revealed that the prevailing price of agricultural land inTabangao-Ambulong,
Batangas City is NINE HUNDRED THIRTY PESOS (P930.00) per square
meter.43 (Emphasis in the original; underscoring supplied)
NPC is thus correct in its observation that the issue of whether it should be
made to pay for the whole 7,015-square meter area was not at all raised.
Besides, in arriving at its judgment, the CA took into full consideration the
Commissioners Reports, which recommended the payment of just
compensation only for the affected portions of respondents properties;if it
believed otherwise, the appellate court would have so indicated, and it would
have taken exception to the said reports and arrived at its own independent
consideration of the case.
It has always been the rule that "[t]he only portion of the decision that may be
the subject of execution is that which isordained or decreed in the dispositive
portion. Whatever may be found in the body of the decision can only be
considered as part of the reasons or conclusions of the court and serve only as
guides to determine the ratio decidendi."44 "[W]here there is a conflict
between the dispositive portion of the decision and the body thereof, the
dispositive portion controls irrespective of what appears in the body of the
decision. While the body of the decision, order or resolution might create some
ambiguityin the manner of the courts reasoning preponderates, it is the
dispositive portion thereof that finally invests rights upon the parties,sets
conditions for the exercise of those rights, and imposes corresponding duties
or obligation."45 Thus, with the decretal portion of the trial courts November
7, 2005 Decision particularly stating that NPC shall have the lawful right to
enter, take possession and acquire easement of right-ofway over the affected
portions of respondents properties upon the payment of just compensation,
any order executing the trial courts Decision should be based on such
dispositive portion. "An order of execution is based on the disposition, not on
the body, of the decision."46 Execution must therefore conform to that
ordained or decreed in the dispositive part of the decision.47 Since there is a
disparity between the dispositive portion of the trial courts November 7, 2005
Decision asaffirmed with modification by the final and executory June 26, 2007
Decision of the CA in CA- G.R. CV No. 86712 which decreed that
respondents be paid just compensation only for the affected portionsof their
properties, totaling 1,595.91 square meters and the Notice of Garnishment
for the satisfaction of the amount of P5,594,462.50 representing just
compensation for the whole 7,015 square meters the latter must be declared
null and void.
It is a settled general principle that a writ of execution must conform
substantially to every essential particular of the judgment promulgated.
Execution not in harmony with the judgment is bereft of validity. It must
conform, more particularly, to that ordained or decreed in the dispositive
portion of the decision.48
In the same manner, the Batangas City RTCs September 24, 2009 and October
23, 2009 Orders are hereby declared null and void in regard only to the Notice
of Garnishment, as it countermands the decretal portion of the November 7,
2005 Decision and completely changes the tenor thereof by holding NPC liable
to pay for the value of the whole of respondents properties; all proceedings
held for the purpose of amending or altering the dispositive portion of the trial
courts November 7, 2005 Decision, as affirmed with modification by the CAs
final and executory June 26, 2007 Decision in CA-G.R. CV No. 86712, are null
and void for lack of jurisdiction.1wphi1 This is exactly what the Court said in
one case:
Moreover, petitioner is correct in saying that impleading her for the purpose
of execution is tantamount to modifying a decision that had long become final
and executory. The falloof the 1997 Decision bythe NLRC only held
"respondents Pro Agency Manila Inc., and Abdul Rahman Al Mahwes to
jointly and severally pay complainants x x x." By holding her liable despite not
being ordained as such by the decision, both the CA and NLRCviolated the
doctrine on immutability of judgments.
In PH Credit Corporation v. Court of Appeals, we stressed that "respondents
[petitioners] obligation is based on the judgment rendered by the trial court.
The dispositive portion or the fallois its decisive resolution and is thus the
subject of execution. x x x. Hence the execution must conform with that which
is ordained or decreed in the dispositive portion of the decision."
In INIMACO v. NLRC, we also held thus:
None of the parties in the case before the Labor Arbiter appealed the Decision
dated March 10, 1987, hence the same became final and executory. It was,
therefore, removed from the jurisdiction of the Labor Arbiter orthe NLRC to
further alter or amend it. Thus, the proceedings held for the purpose of
amending or altering the dispositive portion of the said decision are null and
void for lack of jurisdiction. Also, the Alias Writ of Execution is null and void
because it varied the tenor of the judgment in that it sought to enforce the final
judgment against Antonio Gonzales/Industrial Management Development
Corp. (INIMACO) and/or Filipinas Carbon and Mining Corp. and Gerardo
Sicat, which makes the liability solidary.
In other words, "[o]nce a decision or order becomes final and executory, it is
removed from the power or jurisdiction of the court which rendered it to
further alter or amend it. It thereby becomes immutable and unalterable and
any amendment or alteration which substantially affects a final and executory
judgment is null and void for lack of jurisdiction, including the entire
proceedings heldfor that purpose. An order of execution which varies the
tenor of the judgment or exceeds the terms thereof is a nullity."49 (Emphasis
supplied)
The failure of NPC to include a notice of hearing in its Motion for
Reconsideration of the trial courts September 24, 2009 Order has been
rendered irrelevant considering our pronouncement that the said Order is null
and void on the matter covering the Notice of Garnishment. "A void judgment
or order has no legal and binding effect, force or efficacy for any purpose. In
contemplation of law, it is non-existent. Suchjudgment or order may be
resisted in any action or proceeding whenever it is involved. It is not even
necessary to take any steps to vacate or avoid a void judgment or final order;
itmay simply be ignored."50
WHEREFORE, the Petition is GRANTED. Judgment is hereby rendered as
follows:
1. The January 20, 2011Decision and August 9,2011 Resolution of the
Court of Appeals in CA-G.R. SP No. 112054 are PARTIALLY
REVERSED and SET ASIDE;
2. The September 24, 2009 and October 23, 2009 Orders of the Regional
Trial Court of Batangas City, Branch VII in Civil Case No. 5785 are
declared NULL and VOID IN PART, in that the Notice of
Garnishment is nullified and set aside;
 3. Petitioner National Power Corporation is adjudged liable to PAY
JUST COMPENSATIONto respondents Felicisimo Tarcelo and the
Heirs of Comia Santos for the affected portions of their respective
properties totaling 1,595.91 square meters, at P797.50 per square
meter, subject to interest at the rate of twelve per cent (12%) per
annumfrom July 29, 2002 up to June 30, 2013, and thereafter, six
percent (6%) per annumfrom July 1, 2013 until full satisfaction,
pursuant to Bangko Sentral ng Pilipinas-Monetary Board Circular No.
799, Series of 2013 and applicable jurisprudence;

4. Petitioner National Power Corporation is DIRECTED to pay the

Commissioners' Fees as set forth in the November 7, 2005 Decision of
the Regional Trial Court ofBatangas City, Branch VII in Civil Case No.
5785.

SO ORDERED.
United States v. Causby, 328 U.S. 256 (1946)
United States v. Causby
No. 630
Argued May 1, 1946
Decided May 27, 1946
328 U.S. 256
CERTIORARI TO THE COURT OF CLAIMS
Syllabus
Respondents owned a dwelling and a chicken farm near a municipal airport.
The safe path of glide to one of the runways of the airport passed directly over
respondents' property at 83 feet, which was 67 feet above the house, 63 feet
above the barn and 18 feet above the highest tree. It was used 4% of the time
in taking off and 7% of the time in landing. The Government leased the use of
the airport for a term of one month commencing June 1, 1942, with a provision
for renewals until June 30, 1967, or six months after the end of the national
emergency, whichever was earlier. Various military aircraft of the United
States used the airport. They frequently came so close to respondents' property
that they barely missed the tops of trees, the noise was startling, and the glare
from their landing lights lighted the place up brightly at night. This destroyed
the use of the property as a chicken farm and caused loss of sleep, nervousness,
and fright on the part of respondents. They sued in the Court of Claims to
recover for an alleged taking of their property and for damages to their poultry
business. The Court of Claims found that the Government had taken an
easement over respondents' property, and that the value of the property
destroyed and the easement taken was $2,000; but it made no finding as to the
precise nature or duration of the easement.
Held:
1. A servitude has been imposed upon the land for which respondents are
entitled to compensation under the Fifth Amendment. Pp. 328 U. S. 260-267.
(a) The common law doctrine that ownership of land extends to the periphery
of the universe has no place in the modern world. Pp. 328 U. S. 260-261.
(b) The air above the minimum safe altitude of flight prescribed by the Civil
Aeronautics Authority is a public highway and part of the public domain, as
declared by Congress in the Air Commerce Act of 1926, as amended by the
Civil Aeronautics Act of 1938. Pp. 328 U. S. 260-261, 328 U. S. 266.
(c) Flights below that altitude are not within the navigable air space which
Congress placed within the public domain, even though they are within the
path of glide approved by the Civil Aeronautics Authority. Pp. 328 U. S. 263-
264.
Page 328 U. S. 257
(d) Flights of aircraft over private land which are so low and frequent as to be
a direct and immediate interference with the enjoyment and use of the land
are as much an appropriation of the use of the land as a more conventional
entry upon it. Pp. 328 U. S. 261-262, 328 U. S. 264-267.
2. Since there was a taking of private property for public use, the claim was
"founded upon the Constitution," within the meaning of 141(1) of the Judicial
Code, and the Court of Claims had jurisdiction to hear and determine it. P. 328
U. S. 267.
3. Since the court's findings of fact contain no precise description of the nature
or duration of the easement taken, the judgment is reversed, and the cause is
remanded to the Court of Claims so that it may make the necessary findings.
Pp. 328 U. S. 267-268.
(a) An accurate description of the easement taken is essential, since that
interest vests in the United States. P. 328 U. S. 267.
(b) Findings of fact on every "material issue" are a statutory requirement, and
a deficiency in the findings cannot be rectified by statements in the opinion.
Pp. 328 U. S. 267-268.
(c) A conjecture in lieu of a conclusion from evidence would not be a proper
foundation for liability of the United States. P. 328 U. S. 268.
104 Ct.Cls. 342, 60 F.Supp. 751, reversed and remanded.
The Court of Claims granted respondents a judgment for the value of property
destroyed and damage to their property resulting from the taking of an
easement over their property by low-flying military aircraft of the United
States, but failed to include in its findings of fact a specific description of the
nature or duration of the easement. 104 Ct.Cls. 342, 60 F.Supp. 751. This Court
granted certiorari. 327 U.S. 775. Reversed and remanded, p. 328 U. S. 268.
Page 328 U. S. 258
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This is a case of first impression. The problem presented is whether
respondents' property was taken within the meaning of the Fifth Amendment
by frequent and regular flights of army and navy aircraft over respondents'
land at low altitudes. The Court of Claims held that there was a taking, and
entered judgment for respondent, one judge dissenting. 60 F.Supp. 751. The
case is here on a petition for a writ of certiorari which we granted because of
the importance of the question presented.
Respondents own 2.8 acres near an airport outside of Greensboro, North
Carolina. It has on it a dwelling house, and also various outbuildings which
were mainly used for raising chickens. The end of the airport's northwest-
southeast runway is 2,220 feet from respondents' barn and 2,275 feet from their
house. The path of glide to this runway passes directly over the property --
which is 100 feet wide and 1,200 feet long. The 30 to 1 safe glide angle
[Footnote 1] approved by the Civil Aeronautics Authority [Footnote 2] passes
over this property at 83 feet, which is 67 feet above the house, 63 feet above
the barn and 18 feet above the highest tree. [Footnote 3] The use by the United
States of this airport is pursuant to a lease executed in May, 1942, for a term
commencing June 1, 1942 and ending June 30, 1942, with a provision for
renewals until June 30, 1967, or six
Page 328 U. S. 259
months after the end of the national emergency, whichever is the earlier.
Various aircraft of the United States use this airport -- bombers, transports,
and fighters. The direction of the prevailing wind determines when a
particular runway is used. The northwest-southeast runway in question is
used about four percent of the time in taking off and about seven percent of
the time in landing. Since the United States began operations in May, 1942, its
four-motored heavy bombers, other planes of the heavier type, and its fighter
planes have frequently passed over respondents' land buildings in
considerable numbers and rather close together. They come close enough at
times to appear barely to miss the tops of the trees, and at times so close to the
tops of the trees as to blow the old leaves off. The noise is startling. And, at
night, the glare from the planes brightly lights up the place. As a result of the
noise, respondents had to give up their chicken business. As many as six to
ten of their chickens were killed in one day by flying into the walls from fright.
The total chickens lost in that manner was about 150. Production also fell off.
The result was the destruction of the use of the property as a commercial
chicken farm. Respondents are frequently deprived of their sleep, and the
family has become nervous and frightened. Although there have been no
airplane accidents on respondents' property, there have been several accidents
near the airport and close to respondents' place. These are the essential facts
found by the Court of Claims. On the basis of these facts, it found that
respondents' property had depreciated in value. It held that the United States
had taken an easement over the property on June 1, 1942, and that the value
of the property destroyed and the easement taken was $2,000.
Page 328 U. S. 260
I. The United States relies on the Air Commerce Act of 1926, 44 Stat. 568, 49
U.S.C. 171 et seq., as amended by the Civil Aeronautics Act of 1938, 52 Stat.
973, 49 U.S.C. 401 et seq. Under those statutes, the United States has "complete
and exclusive national sovereignty in the air space" over this country. 49 U.S.C.
176(a). They grant any citizen of the United States "a public right of freedom
of transit in air commerce [Footnote 4] through the navigable air space of the
United States." 49 U.S.C. 403. And "navigable air space" is defined as
"airspace above the minimum safe altitudes of flight prescribed by the Civil
Aeronautics Authority." 49 U.S.C. 180. And it is provided that "such
navigable airspace shall be subject to a public right of freedom of interstate
and foreign air navigation." Id. It is therefore argued that, since these flights
were within the minimum safe altitudes of flight which had been prescribed,
they were an exercise of the declared right of travel through the airspace. The
United States concludes that, when flights are made within the navigable
airspace without any physical invasion of the property of the landowners,
there has been no taking of property. It says that, at most, there was merely
incidental damage occurring as a consequence of authorized air navigation. It
also argues that the landowner does not own superadjacent airspace which he
has not subjected to possession by the erection of structures or other
occupancy. Moreover, it is argued that, even if the United States took airspace
owned by respondents, no compensable damage was shown. Any damages
are said to be merely consequential for which no compensation may be
obtained under the Fifth Amendment.
It is ancient doctrine that at common law ownership of the land extended to
the periphery of the universe -- cujus
Page 328 U. S. 261
est solum ejus est usque and coelum. [Footnote 5] But that doctrine has no place
in the modern world. The air is a public highway, as Congress has declared.
Were that not true, every transcontinental flight would subject the operator to
countless trespass suits. Common sense revolts at the idea. To recognize such
private claims to the airspace would clog these highways, seriously interfere
with their control and development in the public interest, and transfer into
private ownership that to which only the public has a just claim.
But that general principle does not control the present case. For the United
States conceded on oral argument that, if the flights over respondents'
property rendered it uninhabitable, there would be a taking compensable
under the Fifth Amendment. It is the owner's loss, not the taker's gain, which
is the measure of the value of the property taken. United States v. Miller, 317 U.
S. 369. Market value fairly determined is the normal measure of the recovery.
Id. And that value may reflect the use to which the land could readily be
converted, as well as the existing use. United States v. Powelson, 319 U. S. 266,
319 U. S. 275, and cases cited. If, by reason of the frequency and altitude of the
flights, respondents could not use this land for any purpose, their loss would
be complete. [Footnote 6] It would be as complete as if the United States had
entered upon the surface of the land and taken exclusive possession of it.
We agree that, in those circumstances, there would be a taking. Though it
would be only an easement of flight
Page 328 U. S. 262
which was taken, that easement, if permanent and not merely temporary,
normally would be the equivalent of a fee interest. It would be a definite
exercise of complete dominion and control over the surface of the land. The
fact that the planes never touched the surface would be as irrelevant as the
absence in this day of the feudal livery of seisin on the transfer of real estate.
The owner's right to possess and exploit the land -- that is to say, his beneficial
ownership of it -- would be destroyed. It would not be a case of incidental
damages arising from a legalized nuisance, such as was involved in Richards
v. Washington Terminal Co., 233 U. S. 546. In that case, property owners whose
lands adjoined a railroad line were denied recovery for damages resulting
from the noise, vibrations, smoke, and the like, incidental to the operations of
the trains. In the supposed case, the line of flight is over the land. And the land
is appropriated as directly and completely as if it were used for the runways
themselves.
There is no material difference between the supposed case and the present
one, except that, here, enjoyment and use of the land are not completely
destroyed. But that does not seem to us to be controlling. The path of glide for
airplanes might reduce a valuable factory site to grazing land, an orchard to a
vegetable patch, a residential section to a wheat field. Some value would
remain. But the use of the airspace immediately above the land would limit
the utility of the land and cause a diminution in its value. [Footnote 7] That
was the philosophy of Portsmouth Harbor Land & Hotel Co. v.
Page 328 U. S. 263
United States, 260 U. S. 327. In that case, the petition alleged that the United
States erected a fort on nearby land, established a battery and a fire control
station there, and fired guns over petitioner's land. The Court, speaking
through Mr. Justice Holmes, reversed the Court of Claims which dismissed
the petition on a demurrer, holding that "the specific facts set forth would
warrant a finding that a servitude has been imposed." [Footnote 8] 260 U.S. at
260 U. S. 330. And see Delta Air Corp. v. Kersey, 193 Ga. 862, 20 S.E.2d 245. Cf.
United States v. 357.25 Acres of Land, 55 F.Supp. 461.
The fact that the path of glide taken by the planes was that approved by the
Civil Aeronautics Authority does not change the result. The navigable
airspace which Congress has placed in the public domain is "airspace above
the minimum safe altitudes of flight prescribed by the Civil Aeronautics
Authority." 49 U.S.C. 180. If that agency prescribed 83 feet as the minimum
safe altitude, then we would have presented the question of the validity of the
regulation. But nothing of the sort has been done. The path of glide governs
the method of operating -- of landing or taking off. The altitude required for
that operation is not the minimum safe altitude of flight which is the
downward reach of the navigable airspace. The minimum prescribed by the
authority is 500 feet during the day and 1000 feet at night for air carriers (Civil
Air Regulations, Pt. 61, 61.7400, 61.7401, Code Fed.Reg.Cum.Supp., Tit. 14,
ch. 1) and from 300 to 1000 feet for
Page 328 U. S. 264
other aircraft depending on the type of plane and the character of the terrain.
Id., Pt. 60, 60.350-60.3505, Fed.Reg.Cum.Supp., supra. Hence, the flights in
question were not within the navigable airspace which Congress placed
within the public domain. If any airspace needed for landing or taking off were
included, flights which were so close to the land as to render it uninhabitable
would be immune. But the United States concedes, as we have said, that, in
that event, there would be a taking. Thus, it is apparent that the path of glide
is not the minimum safe altitude of flight within the meaning of the statute.
The Civil Aeronautics Authority has, of course, the power to prescribe air
traffic rules. But Congress has defined navigable airspace only in terms of one
of them -- the minimum safe altitudes of flight.
We have said that the airspace is a public highway. Yet it is obvious that, if the
landowner is to have full enjoyment of the land, he must have exclusive
control of the immediate reaches of the enveloping atmosphere. Otherwise
buildings could not be erected, trees could not be planted, and even fences
could not be run. The principle is recognized when the law gives a remedy in
case overhanging structures are erected on adjoining land. [Footnote 9] The
landowner owns at least as much of the space above the ground as the can
occupy or use in connection with the land. See Hinman v. Pacific Air Transport,
84 F.2d 755. The fact that he does not occupy it in a physical sense -- by the
erection of buildings and the like -- is not material. As we have said, the flight
of airplanes, which skim the surface but do not touch it, is as much an
appropriation of the use of the land as a more conventional entry upon it. We
would not doubt that, if the United States erected
Page 328 U. S. 265
an elevated railway over respondents' land at the precise altitude where its
planes now fly, there would be a partial taking, even though none of the
supports of the structure rested on the land. [Footnote 10] The reason is that
there would be an intrusion so immediate and direct as to subtract from the
owner's full enjoyment of the property and to limit his exploitation of it. While
the owner does not in any physical manner occupy that stratum of airspace or
make use of it in the conventional sense, he does use it in somewhat the same
sense that space left between buildings for the purpose of light and air is used.
The superadjacent airspace at this low altitude is so close to the land that
continuous invasions of it affect the use of the surface of the land itself. We
think that the landowner, as an incident to his ownership, has a claim to it,
and that invasions of it are in the same category as invasions of the surface.
[Footnote 11]
In this case, as in Portsmouth Harbor Land & Hotel Co. v. United States, supra, the
damages were not merely consequential. They were the product of a direct
invasion of respondents' domain.
Page 328 U. S. 266
As stated in United States v. Cress, 243 U. S. 316, 243 U. S. 328,
". . . it is the character of the invasion, not the amount of damage resulting from
it, so long as the damage is substantial, that determines the question whether
it is a taking."
We said in United States v. Powelson, supra, p. 319 U. S. 279, that, while the
meaning of "property" as used in the Fifth Amendment was a federal question,
"it will normally obtain its content by reference to local law." If we look to
North Carolina law, we reach the same result. Sovereignty in the airspace rests
in the State "except where granted to and assumed by the United States."
Gen.Stats.1943, 63-11. The flight of aircraft is lawful
"unless at such a low altitude as to interfere with the then existing use to which
the land or water, or the space over the land or water, is put by the owner, or
unless so conducted as to be imminently dangerous to persons or property
lawfully on the land or water beneath."
Id., 63-13. Subject to that right of flight, "ownership of the space above the
lands and waters of this State is declared to be vested in the several owners of
the surface beneath." Id., 63-12. Our holding that there was an invasion of
respondents' property is thus not inconsistent with the local law governing a
landowner's claim to the immediate reaches of the superadjacent airspace.
The airplane is part of the modern environment of life, and the inconveniences
which it causes are normally not compensable under the Fifth Amendment.
The airspace, apart from the immediate reaches above the land, is part of the
public domain. We need not determine at this time what those precise limits
are. Flights over private land are not a taking, unless they are so low and so
frequent as to be a direct and immediate interference with the enjoyment and
use of the land. We need not speculate on that phase of the present case. For
the findings of the Court
Page 328 U. S. 267
of Claims plainly establish that there was a diminution in value of the
property, and that the frequent, low-level flights were the direct and
immediate cause. We agree with the Court of Claims that a servitude has been
imposed upon the land.
II. By 145(1) of the Judicial Code, 28 U.S.C. 250(1), the Court of Claims has
jurisdiction to hear and determine
"All claims (except for pensions) founded upon the Constitution of the United
States or . . . upon any contract, express or implied, with the Government of
the United States."
We need not decide whether repeated trespasses might give rise to an implied
contract. Cf. Portsmouth Harbor Land & Hotel Co. v. United States, supra. If there
is a taking, the claim is "founded upon the Constitution," and within the
jurisdiction of the Court of Claims to hear and determine. See Hollister v.
Benedict & Burnham Mfg. Co., 113 U. S. 59, 113 U. S. 67; Hurley v. Kincaid, 285 U.
S. 95, 285 U. S. 104; Yearsley v. W. A. Ross Construction Co., 309 U. S. 18, 309 U.
S. 21. Thus, the jurisdiction of the Court of Claims in this case is clear.
III. The Court of Claims held, as we have noted, that an easement was taken.
But the findings of fact contain no precise description as to its nature. It is not
described in terms of frequency of flight, permissible altitude, or type of
airplane. Nor is there a finding as to whether the easement taken was
temporary or permanent. Yet an accurate description of the property taken is
essential, since that interest vests in the United States. United States v. Cress,
supra, 243 U. S. 328-329, and cases cited. It is true that the Court of Claims
stated in its opinion that the easement taken was permanent. But the
deficiency in findings cannot be rectified by statements in the opinion. United
States v. Esnault-Pelterie, 299 U. S. 201, 299 U. S. 205-206; United States v.
Seminole Nation, 299 U. S. 417, 299 U. S. 422. Findings of fact on every "material
issue" are a statutory
Page 328 U. S. 268
requirement. 53 Stat. 752, 28 U.S.C. 288. The importance of findings of fact
based on evidence is emphasized here by the Court of Claims' treatment of the
nature of the easement. It stated in its opinion that the easement was
permanent because the United States "no doubt intended to make some sort
of arrangement whereby it could use the airport for its military planes
whenever it had occasion to do so." That sounds more like conjecture, rather
than a conclusion from evidence, and if so, it would not be a proper foundation
for liability of the United States. We do not stop to examine the evidence to
determine whether it would support such a finding, if made. For that is not
our function. United States v. Esnault-Pelterie, supra, p. 299 U. S. 206.

Since on this record it is not clear whether the easement taken is a permanent
or a temporary one, it would be premature for us to consider whether the
amount of the award made by the Court of Claims was proper.

The judgment is reversed, and the cause is remanded to the Court of Claims
so that it may make the necessary findings in conformity with this opinion.

Reversed.
EN BANC
[G.R. No. 118127. April 12, 2005]
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of
Manila, HON. JOSELITO L. ATIENZA, in his capacity as Vice-Mayor of the
City of Manila and Presiding Officer of the City Council of Manila, HON.
ERNESTO A. NIEVA, HON. GONZALO P. GONZALES, HON. AVELINO S.
CAILIAN, HON. ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO,
HON. HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA, JR., HON.
ROMUALDO S. MARANAN, HON. NESTOR C. PONCE, JR., HON.
HUMBERTO B. BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON.
ROMEO G. RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE
JESUS, HON. BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON.
JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON. VICTORIANO A.
MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P.
NIETO, HON. DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR.,
HON. MA. PAZ E. HERRERA, HON. JOEY D. HIZON, HON. FELIXBERTO
D. ESPIRITU, HON. KARLO Q. BUTIONG, HON. ROGELIO P. DELA PAZ,
HON. BERNARDO D. RAGAZA, HON. MA. CORAZON R. CABALLES,
HON. CASIMIRO C. SISON, HON. BIENVINIDO M. ABANTE, JR., HON.
MA. LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO
F. RIVERA, HON. LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS,
in their capacity as councilors of the City of Manila, petitioners, vs. HON.
PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE
TOURIST DEVELOPMENT CORPORATION, respondents.
DECISION
TINGA, J.:
I know only that what is moral is what you feel good after and what is immoral
is what you feel bad after.
Ernest Hermingway
Death in the Afternoon, Ch. 1
It is a moral and political axiom that any dishonorable act, if performed by
oneself, is less immoral than if performed by someone else, who would be
well-intentioned in his dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch. I
The Courts commitment to the protection of morals is secondary to its fealty
to the fundamental law of the land. It is foremost a guardian of the
Constitution but not the conscience of individuals. And if it need be, the Court
will not hesitate to make the hammer fall, and heavily in the words of Justice
Laurel, and uphold the constitutional guarantees when faced with laws that,
though not lacking in zeal to promote morality, nevertheless fail to pass the
test of constitutionality.
The pivotal issue in this Petition[1] under Rule 45 (then Rule 42) of the Revised
Rules on Civil Procedure seeking the reversal of the Decision[2] in Civil Case
No. 93-66511 of the Regional Trial Court (RTC) of Manila, Branch 18 (lower
court),[3] is the validity of Ordinance No. 7783 (the Ordinance) of the City of
Manila.[4]
The antecedents are as follows:
Private respondent Malate Tourist Development Corporation (MTDC) is a
corporation engaged in the business of operating hotels, motels, hostels and
lodging houses.[5] It built and opened Victoria Court in Malate which was
licensed as a motel although duly accredited with the Department of Tourism
as a hotel.[6] On 28 June 1993, MTDC filed a Petition for Declaratory Relief with
Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining Order[7]
(RTC Petition) with the lower court impleading as defendants, herein
petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza,
and the members of the City Council of Manila (City Council). MTDC prayed
that the Ordinance, insofar as it includes motels and inns as among its
prohibited establishments, be declared invalid and unconstitutional.[8]
Enacted by the City Council[9] on 9 March 1993 and approved by petitioner
City Mayor on 30 March 1993, the said Ordinance is entitled
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION
OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT,
ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-
MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF,
AND FOR OTHER PURPOSES.[10]
The Ordinance is reproduced in full, hereunder:
SECTION 1. Any provision of existing laws and ordinances to the contrary
notwithstanding, no person, partnership, corporation or entity shall, in the
Ermita-Malate area bounded by Teodoro M. Kalaw Sr. Street in the North,
Taft Avenue in the East, Vito Cruz Street in the South and Roxas Boulevard in
the West, pursuant to P.D. 499 be allowed or authorized to contract and
engage in, any business providing certain forms of amusement,
entertainment, services and facilities where women are used as tools in
entertainment and which tend to disturb the community, annoy the
inhabitants, and adversely affect the social and moral welfare of the
community, such as but not limited to:
1. Sauna Parlors
2. Massage Parlors
3. Karaoke Bars
4. Beerhouses
5. Night Clubs
6. Day Clubs
7. Super Clubs
8. Discotheques
9. Cabarets
10. Dance Halls
11. Motels
12. Inns
SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of
the said officials are prohibited from issuing permits, temporary or
otherwise, or from granting licenses and accepting payments for the
operation of business enumerated in the preceding section.
SEC. 3. Owners and/or operator of establishments engaged in, or devoted to,
the businesses enumerated in Section 1 hereof are hereby given three (3)
months from the date of approval of this ordinance within which to wind
up business operations or to transfer to any place outside of the Ermita-
Malate area or convert said businesses to other kinds of business allowable
within the area, such as but not limited to:
1. Curio or antique shop
2. Souvenir Shops
3. Handicrafts display centers
4. Art galleries
5. Records and music shops
6. Restaurants
7. Coffee shops
8. Flower shops
9. Music lounge and sing-along restaurants, with
well-defined activities for wholesome family entertainment that
cater to both local and foreign clientele.
10. Theaters engaged in the exhibition, not only of
motion pictures but also of cultural shows, stage and theatrical
plays, art exhibitions, concerts and the like.
11. Businesses allowable within the law and medium intensity
districts as provided for in the zoning ordinances for Metropolitan Manila,
except new warehouse or open-storage depot, dock or yard, motor repair
shop, gasoline service station, light industry with any machinery, or funeral
establishments.
SEC. 4. Any person violating any provisions of this ordinance, shall upon
conviction, be punished by imprisonment of one (1) year or fine of FIVE
THOUSAND (P5,000.00) PESOS, or both, at the discretion of the Court,
PROVIDED, that in case of juridical person, the President, the General
Manager, or person-in-charge of operation shall be liable thereof; PROVIDED
FURTHER, that in case of subsequent violation and conviction, the premises
of the erring establishment shall be closed and padlocked permanently.
SEC. 5. This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session today, March 9,
1993.
Approved by His Honor, the Mayor on March 30, 1993. (Emphasis supplied)
In the RTC Petition, MTDC argued that the Ordinance erroneously and
improperly included in its enumeration of prohibited establishments, motels
and inns such as MTDCs Victoria Court considering that these were not
establishments for amusement or entertainment and they were not services or
facilities for entertainment, nor did they use women as tools for entertainment,
and neither did they disturb the community, annoy the inhabitants or
adversely affect the social and moral welfare of the community.[11]
MTDC further advanced that the Ordinance was invalid and unconstitutional
for the following reasons: (1) The City Council has no power to prohibit the
operation of motels as Section 458 (a) 4 (iv)[12] of the Local Government Code
of 1991 (the Code) grants to the City Council only the power to regulate the
establishment, operation and maintenance of hotels, motels, inns, pension
houses, lodging houses and other similar establishments; (2) The Ordinance is
void as it is violative of Presidential Decree (P.D.) No. 499[13] which
specifically declared portions of the Ermita-Malate area as a commercial zone
with certain restrictions; (3) The Ordinance does not constitute a proper
exercise of police power as the compulsory closure of the motel business has
no reasonable relation to the legitimate municipal interests sought to be
protected; (4) The Ordinance constitutes an ex post facto law by punishing the
operation of Victoria Court which was a legitimate business prior to its
enactment; (5) The Ordinance violates MTDCs constitutional rights in that: (a)
it is confiscatory and constitutes an invasion of plaintiffs property rights; (b)
the City Council has no power to find as a fact that a particular thing is a
nuisance per se nor does it have the power to extrajudicially destroy it; and (6)
The Ordinance constitutes a denial of equal protection under the law as no
reasonable basis exists for prohibiting the operation of motels and inns, but
not pension houses, hotels, lodging houses or other similar establishments,
and for prohibiting said business in the Ermita-Malate area but not outside of
this area.[14]
In their Answer[15] dated 23 July 1993, petitioners City of Manila and Lim
maintained that the City Council had the power to prohibit certain forms of
entertainment in order to protect the social and moral welfare of the
community as provided for in Section 458 (a) 4 (vii) of the Local Government
Code,[16] which reads, thus:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
....
(4) Regulate activities relative to the use of land, buildings and structures
within the city in order to promote the general welfare and for said purpose
shall:
....
(vii) Regulate the establishment, operation, and maintenance of any
entertainment or amusement facilities, including theatrical
performances, circuses, billiard pools, public dancing schools,
public dance halls, sauna baths, massage parlors, and other places
for entertainment or amusement; regulate such other events or
activities for amusement or entertainment, particularly those which
tend to disturb the community or annoy the inhabitants, or require
the suspension or suppression of the same; or, prohibit certain forms
of amusement or entertainment in order to protect the social and
moral welfare of the community.
Citing Kwong Sing v. City of Manila,[17] petitioners insisted that the power of
regulation spoken of in the above-quoted provision included the power to
control, to govern and to restrain places of exhibition and amusement.[18]
Petitioners likewise asserted that the Ordinance was enacted by the City
Council of Manila to protect the social and moral welfare of the community in
conjunction with its police power as found in Article III, Section 18(kk) of
Republic Act No. 409,[19] otherwise known as the Revised Charter of the City
of Manila (Revised Charter of Manila)[20] which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
...
Section 18. Legislative powers. The Municipal Board shall have the
following legislative powers:
...
(kk) To enact all ordinances it may deem necessary and proper for
the sanitation and safety, the furtherance of the prosperity, and the
promotion of the morality, peace, good order, comfort, convenience,
and general welfare of the city and its inhabitants, and such others
as may be necessary to carry into effect and discharge the powers
and duties conferred by this chapter; and to fix penalties for the
violation of ordinances which shall not exceed two hundred pesos
fine or six months imprisonment, or both such fine and
imprisonment, for a single offense.
Further, the petitioners noted, the Ordinance had the presumption of validity;
hence, private respondent had the burden to prove its illegality or
unconstitutionality.[21]
Petitioners also maintained that there was no inconsistency between P.D. 499
and the Ordinance as the latter simply disauthorized certain forms of
businesses and allowed the Ermita-Malate area to remain a commercial
zone.[22] The Ordinance, the petitioners likewise claimed, cannot be assailed
as ex post facto as it was prospective in operation.[23] The Ordinance also did
not infringe the equal protection clause and cannot be denounced as class
legislation as there existed substantial and real differences between the
Ermita-Malate area and other places in the City of Manila.[24]
On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio)
issued an ex-parte temporary restraining order against the enforcement of the
Ordinance.[25] And on 16 July 1993, again in an intrepid gesture, he granted
the writ of preliminary injunction prayed for by MTDC.[26]
After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision,
enjoining the petitioners from implementing the Ordinance. The dispositive
portion of said Decision reads:[27]
WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3],
Series of 1993, of the City of Manila null and void, and making permanent the
writ of preliminary injunction that had been issued by this Court against the
defendant. No costs.
SO ORDERED.[28]
Petitioners filed with the lower court a Notice of Appeal[29] on 12 December
1994, manifesting that they are elevating the case to this Court under then Rule
42 on pure questions of law.[30]
On 11 January 1995, petitioners filed the present Petition, alleging that the
following errors were committed by the lower court in its ruling: (1) It erred
in concluding that the subject ordinance is ultra vires, or otherwise, unfair,
unreasonable and oppressive exercise of police power; (2) It erred in holding
that the questioned Ordinance contravenes P.D. 499[31] which allows
operators of all kinds of commercial establishments, except those specified
therein; and (3) It erred in declaring the Ordinance void and
unconstitutional.[32]
In the Petition and in its Memorandum,[33] petitioners in essence repeat the
assertions they made before the lower court. They contend that the assailed
Ordinance was enacted in the exercise of the inherent and plenary power of the
State and the general welfare clause exercised by local government units
provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and
conjunctively, Section 458 (a) 4 (vii) of the Code.[34] They allege that the
Ordinance is a valid exercise of police power; it does not contravene P.D. 499;
and that it enjoys the presumption of validity.[35]
In its Memorandum[36] dated 27 May 1996, private respondent maintains that
the Ordinance is ultra vires and that it is void for being repugnant to the general
law. It reiterates that the questioned Ordinance is not a valid exercise of police
power; that it is violative of due process, confiscatory and amounts to an
arbitrary interference with its lawful business; that it is violative of the equal
protection clause; and that it confers on petitioner City Mayor or any officer
unregulated discretion in the execution of the Ordinance absent rules to guide
and control his actions.
This is an opportune time to express the Courts deep sentiment and
tenderness for the Ermita-Malate area being its home for several decades. A
long-time resident, the Court witnessed the areas many turn of events. It
relished its glory days and endured its days of infamy. Much as the Court
harks back to the resplendent era of the Old Manila and yearns to restore its
lost grandeur, it believes that the Ordinance is not the fitting means to that end.
The Court is of the opinion, and so holds, that the lower court did not err in
declaring the Ordinance, as it did, ultra vires and therefore null and void.
The Ordinance is so replete with constitutional infirmities that almost every
sentence thereof violates a constitutional provision. The prohibitions and
sanctions therein transgress the cardinal rights of persons enshrined by the
Constitution. The Court is called upon to shelter these rights from attempts at
rendering them worthless.
The tests of a valid ordinance are well established. A long line of decisions has
held that for an ordinance to be valid, it must not only be within the corporate
powers of the local government unit to enact and must be passed according to
the procedure prescribed by law, it must also conform to the following
substantive requirements: (1) must not contravene the Constitution or any
statute; (2) must not be unfair or oppressive; (3) must not be partial or
discriminatory; (4) must not prohibit but may regulate trade; (5) must be
general and consistent with public policy; and (6) must not be
unreasonable.[37]
Anent the first criterion, ordinances shall only be valid when they are not
contrary to the Constitution and to the laws.[38] The Ordinance must satisfy
two requirements: it must pass muster under the test of constitutionality and
the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The
requirement that the enactment must not violate existing law gives stress to
the precept that local government units are able to legislate only by virtue of
their derivative legislative power, a delegation of legislative power from the
national legislature. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter.[39]
This relationship between the national legislature and the local government
units has not been enfeebled by the new provisions in the Constitution
strengthening the policy of local autonomy. The national legislature is still the
principal of the local government units, which cannot defy its will or modify
or violate it.[40]
The Ordinance was passed by the City Council in the exercise of its police
power, an enactment of the City Council acting as agent of Congress. Local
government units, as agencies of the State, are endowed with police power in
order to effectively accomplish and carry out the declared objects of their
creation.[41] This delegated police power is found in Section 16 of the Code,
known as the general welfare clause, viz:
SECTION 16. General Welfare.Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government
units shall ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve
public morals, enhance economic prosperity and social justice, promote full
employment among their residents, maintain peace and order, and preserve
the comfort and convenience of their inhabitants.
Local government units exercise police power through their respective
legislative bodies; in this case, the sangguniang panlungsod or the city council.
The Code empowers the legislative bodies to enact ordinances, approve
resolutions and appropriate funds for the general welfare of the
province/city/municipality and its inhabitants pursuant to Section 16 of the
Code and in the proper exercise of the corporate powers of the province/city/
municipality provided under the Code.[42] The inquiry in this Petition is
concerned with the validity of the exercise of such delegated power.
The Ordinance contravenes
the Constitution
The police power of the City Council, however broad and far-reaching, is
subordinate to the constitutional limitations thereon; and is subject to the
limitation that its exercise must be reasonable and for the public good.[43] In
the case at bar, the enactment of the Ordinance was an invalid exercise of
delegated power as it is unconstitutional and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5. The maintenance of peace and order, the protection of life, liberty, and
property, and the promotion of the general welfare are essential for the
enjoyment by all the people of the blessings of democracy.[44]
SEC. 14. The State recognizes the role of women in nation-building, and shall
ensure the fundamental equality before the law of women and men.[45]
SEC. 1. No person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal protection of laws.[46]
Sec. 9. Private property shall not be taken for public use without just
compensation.[47]
A. The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is embodied in the fiat (N)o
person shall be deprived of life, liberty or property without due process of
law. . . .[48]
There is no controlling and precise definition of due process. It furnishes
though a standard to which governmental action should conform in order that
deprivation of life, liberty or property, in each appropriate case, be valid. This
standard is aptly described as a responsiveness to the supremacy of reason,
obedience to the dictates of justice,[49] and as such it is a limitation upon the
exercise of the police power.[50]
The purpose of the guaranty is to prevent governmental encroachment against
the life, liberty and property of individuals; to secure the individual from the
arbitrary exercise of the powers of the government, unrestrained by the
established principles of private rights and distributive justice; to protect
property from confiscation by legislative enactments, from seizure, forfeiture,
and destruction without a trial and conviction by the ordinary mode of judicial
procedure; and to secure to all persons equal and impartial justice and the
benefit of the general law.[51]
The guaranty serves as a protection against arbitrary regulation, and private
corporations and partnerships are persons within the scope of the guaranty
insofar as their property is concerned.[52]
This clause has been interpreted as imposing two separate limits on
government, usually called procedural due process and substantive due
process.
Procedural due process, as the phrase implies, refers to the procedures that
the government must follow before it deprives a person of life, liberty, or
property. Classic procedural due process issues are concerned with what kind
of notice and what form of hearing the government must provide when it
takes a particular action.[53]
Substantive due process, as that phrase connotes, asks whether the
government has an adequate reason for taking away a persons life, liberty, or
property. In other words, substantive due process looks to whether there is a
sufficient justification for the governments action.[54] Case law in the United
States (U.S.) tells us that whether there is such a justification depends very
much on the level of scrutiny used.[55] For example, if a law is in an area
where only rational basis review is applied, substantive due process is met so
long as the law is rationally related to a legitimate government purpose. But if
it is an area where strict scrutiny is used, such as for protecting fundamental
rights, then the government will meet substantive due process only if it can
prove that the law is necessary to achieve a compelling government
purpose.[56]
The police power granted to local government units must always be exercised
with utmost observance of the rights of the people to due process and equal
protection of the law. Such power cannot be exercised whimsically, arbitrarily
or despotically[57] as its exercise is subject to a qualification, limitation or
restriction demanded by the respect and regard due to the prescription of the
fundamental law, particularly those forming part of the Bill of Rights.
Individual rights, it bears emphasis, may be adversely affected only to the
extent that may fairly be required by the legitimate demands of public interest
or public welfare.[58] Due process requires the intrinsic validity of the law in
interfering with the rights of the person to his life, liberty and property.[59]
Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as the rationale for the
enactment of the Ordinance, and to free it from the imputation of constitutional
infirmity, not only must it appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with
private rights, but the means adopted must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon
individuals.[60] It must be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. A
reasonable relation must exist between the purposes of the police measure and
the means employed for its accomplishment, for even under the guise of
protecting the public interest, personal rights and those pertaining to private
property will not be permitted to be arbitrarily invaded.[61]
Lacking a concurrence of these two requisites, the police measure shall be
struck down as an arbitrary intrusion into private rights[62] a violation of the
due process clause.
The Ordinance was enacted to address and arrest the social ills purportedly
spawned by the establishments in the Ermita-Malate area which are allegedly
operated under the deceptive veneer of legitimate, licensed and tax-paying
nightclubs, bars, karaoke bars, girlie houses, cocktail lounges, hotels and
motels. Petitioners insist that even the Court in the case of Ermita-Malate Hotel
and Motel Operators Association, Inc. v. City Mayor of Manila[63] had already
taken judicial notice of the alarming increase in the rate of prostitution,
adultery and fornication in Manila traceable in great part to existence of
motels, which provide a necessary atmosphere for clandestine entry, presence
and exit and thus become the ideal haven for prostitutes and thrill-seekers.[64]
The object of the Ordinance was, accordingly, the promotion and protection of
the social and moral values of the community. Granting for the sake of
argument that the objectives of the Ordinance are within the scope of the City
Councils police powers, the means employed for the accomplishment thereof
were unreasonable and unduly oppressive.
It is undoubtedly one of the fundamental duties of the City of Manila to make
all reasonable regulations looking to the promotion of the moral and social
values of the community. However, the worthy aim of fostering public morals
and the eradication of the communitys social ills can be achieved through
means less restrictive of private rights; it can be attained by reasonable
restrictions rather than by an absolute prohibition. The closing down and
transfer of businesses or their conversion into businesses allowed under the
Ordinance have no reasonable relation to the accomplishment of its purposes.
Otherwise stated, the prohibition of the enumerated establishments will not
per se protect and promote the social and moral welfare of the community; it
will not in itself eradicate the alluded social ills of prostitution, adultery,
fornication nor will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area teems with houses of ill-
repute and establishments of the like which the City Council may lawfully
prohibit,[65] it is baseless and insupportable to bring within that classification
sauna parlors, massage parlors, karaoke bars, night clubs, day clubs, super
clubs, discotheques, cabarets, dance halls, motels and inns. This is not
warranted under the accepted definitions of these terms. The enumerated
establishments are lawful pursuits which are not per se offensive to the moral
welfare of the community.
That these are used as arenas to consummate illicit sexual affairs and as venues
to further the illegal prostitution is of no moment. We lay stress on the acrid
truth that sexual immorality, being a human frailty, may take place in the most
innocent of places that it may even take place in the substitute establishments
enumerated under Section 3 of the Ordinance. If the flawed logic of the
Ordinance were to be followed, in the remote instance that an immoral sexual
act transpires in a church cloister or a court chamber, we would behold the
spectacle of the City of Manila ordering the closure of the church or court
concerned. Every house, building, park, curb, street or even vehicles for that
matter will not be exempt from the prohibition. Simply because there are no
pure places where there are impure men. Indeed, even the Scripture and the
Tradition of Christians churches continually recall the presence and
universality of sin in mans history.[66]
The problem, it needs to be pointed out, is not the establishment, which by its
nature cannot be said to be injurious to the health or comfort of the community
and which in itself is amoral, but the deplorable human activity that may occur
within its premises. While a motel may be used as a venue for immoral sexual
activity, it cannot for that reason alone be punished. It cannot be classified as
a house of ill-repute or as a nuisance per se on a mere likelihood or a naked
assumption. If that were so and if that were allowed, then the Ermita-Malate
area would not only be purged of its supposed social ills, it would be
extinguished of its soul as well as every human activity, reprehensible or not,
in its every nook and cranny would be laid bare to the estimation of the
authorities.
The Ordinance seeks to legislate morality but fails to address the core issues of
morality. Try as the Ordinance may to shape morality, it should not foster the
illusion that it can make a moral man out of it because immorality is not a
thing, a building or establishment; it is in the hearts of men. The City Council
instead should regulate human conduct that occurs inside the establishments,
but not to the detriment of liberty and privacy which are covenants, premiums
and blessings of democracy.
While petitioners earnestness at curbing clearly objectionable social ills is
commendable, they unwittingly punish even the proprietors and operators of
wholesome, innocent establishments. In the instant case, there is a clear
invasion of personal or property rights, personal in the case of those
individuals desirous of owning, operating and patronizing those motels and
property in terms of the investments made and the salaries to be paid to those
therein employed. If the City of Manila so desires to put an end to prostitution,
fornication and other social ills, it can instead impose reasonable regulations
such as daily inspections of the establishments for any violation of the
conditions of their licenses or permits; it may exercise its authority to suspend
or revoke their licenses for these violations;[67] and it may even impose
increased license fees. In other words, there are other means to reasonably
accomplish the desired end.
Means employed are
constitutionally infirm
The Ordinance disallows the operation of sauna parlors, massage parlors,
karaoke bars, beerhouses, night clubs, day clubs, super clubs, discotheques,
cabarets, dance halls, motels and inns in the Ermita-Malate area. In Section 3
thereof, owners and/or operators of the enumerated establishments are given
three (3) months from the date of approval of the Ordinance within which to
wind up business operations or to transfer to any place outside the Ermita-
Malate area or convert said businesses to other kinds of business allowable
within the area. Further, it states in Section 4 that in cases of subsequent
violations of the provisions of the Ordinance, the premises of the erring
establishment shall be closed and padlocked permanently.
It is readily apparent that the means employed by the Ordinance for the
achievement of its purposes, the governmental interference itself, infringes on
the constitutional guarantees of a persons fundamental right to liberty and
property.
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to
include the right to exist and the right to be free from arbitrary restraint or
servitude. The term cannot be dwarfed into mere freedom from physical
restraint of the person of the citizen, but is deemed to embrace the right of man
to enjoy the facilities with which he has been endowed by his Creator, subject
only to such restraint as are necessary for the common welfare.[68] In
accordance with this case, the rights of the citizen to be free to use his faculties
in all lawful ways; to live and work where he will; to earn his livelihood by
any lawful calling; and to pursue any avocation are all deemed embraced in
the concept of liberty.[69]
The U.S. Supreme Court in the case of Roth v. Board of Regents,[70] sought to
clarify the meaning of liberty. It said:
While the Court has not attempted to define with exactness the liberty. . .
guaranteed [by the Fifth and Fourteenth Amendments], the term denotes not
merely freedom from bodily restraint but also the right of the individual to
contract, to engage in any of the common occupations of life, to acquire useful
knowledge, to marry, establish a home and bring up children, to worship God
according to the dictates of his own conscience, and generally to enjoy those
privileges long recognizedas essential to the orderly pursuit of happiness by
free men. In a Constitution for a free people, there can be no doubt that the
meaning of liberty must be broad indeed.
In another case, it also confirmed that liberty protected by the due process
clause includes personal decisions relating to marriage, procreation,
contraception, family relationships, child rearing, and education. In
explaining the respect the Constitution demands for the autonomy of the
person in making these choices, the U.S. Supreme Court explained:
These matters, involving the most intimate and personal choices a person may
make in a lifetime, choices central to personal dignity and autonomy, are
central to the liberty protected by the Fourteenth Amendment. At the heart of
liberty is the right to define ones own concept of existence, of meaning, of
universe, and of the mystery of human life. Beliefs about these matters could
not define the attributes of personhood where they formed under compulsion
of the State.[71]
Persons desirous to own, operate and patronize the enumerated
establishments under Section 1 of the Ordinance may seek autonomy for these
purposes.
Motel patrons who are single and unmarried may invoke this right to
autonomy to consummate their bonds in intimate sexual conduct within the
motels premisesbe it stressed that their consensual sexual behavior does not
contravene any fundamental state policy as contained in the Constitution.[72]
Adults have a right to choose to forge such relationships with others in the
confines of their own private lives and still retain their dignity as free persons.
The liberty protected by the Constitution allows persons the right to make this
choice.[73] Their right to liberty under the due process clause gives them the
full right to engage in their conduct without intervention of the government,
as long as they do not run afoul of the law. Liberty should be the rule and
restraint the exception.
Liberty in the constitutional sense not only means freedom from unlawful
government restraint; it must include privacy as well, if it is to be a repository
of freedom. The right to be let alone is the beginning of all freedomit is the
most comprehensive of rights and the right most valued by civilized men.[74]
The concept of liberty compels respect for the individual whose claim to
privacy and interference demands respect. As the case of Morfe v. Mutuc,[75]
borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His
separateness, his isolation, are indefeasible; indeed, they are so fundamental
that they are the basis on which his civic obligations are built. He cannot
abandon the consequences of his isolation, which are, broadly speaking, that
his experience is private, and the will built out of that experience personal to
himself. If he surrenders his will to others, he surrenders himself. If his will is
set by the will of others, he ceases to be a master of himself. I cannot believe
that a man no longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe,
the invasion of which should be justified by a compelling state interest. Morfe
accorded recognition to the right to privacy independently of its identification
with liberty; in itself it is fully deserving of constitutional protection.
Governmental powers should stop short of certain intrusions into the personal
life of the citizen.[76]
There is a great temptation to have an extended discussion on these civil
liberties but the Court chooses to exercise restraint and restrict itself to the
issues presented when it should. The previous pronouncements of the Court
are not to be interpreted as a license for adults to engage in criminal conduct.
The reprehensibility of such conduct is not diminished. The Court only
reaffirms and guarantees their right to make this choice. Should they be
prosecuted for their illegal conduct, they should suffer the consequences of the
choice they have made. That, ultimately, is their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and oppressive as it substantially
divests the respondent of the beneficial use of its property.[77] The Ordinance
in Section 1 thereof forbids the running of the enumerated businesses in the
Ermita-Malate area and in Section 3 instructs its owners/operators to wind up
business operations or to transfer outside the area or convert said businesses
into allowed businesses. An ordinance which permanently restricts the use of
property that it can not be used for any reasonable purpose goes beyond
regulation and must be recognized as a taking of the property without just
compensation.[78] It is intrusive and violative of the private property rights of
individuals.
The Constitution expressly provides in Article III, Section 9, that private
property shall not be taken for public use without just compensation. The
provision is the most important protection of property rights in the
Constitution. This is a restriction on the general power of the government to
take property. The constitutional provision is about ensuring that the
government does not confiscate the property of some to give it to others. In
part too, it is about loss spreading. If the government takes away a persons
property to benefit society, then society should pay. The principal purpose of
the guarantee is to bar the Government from forcing some people alone to bear
public burdens which, in all fairness and justice, should be borne by the public
as a whole.[79]
There are two different types of taking that can be identified. A possessory
taking occurs when the government confiscates or physically occupies
property. A regulatory taking occurs when the governments regulation leaves
no reasonable economically viable use of the property.[80]
In the landmark case of Pennsylvania Coal v. Mahon,[81] it was held that a
taking also could be found if government regulation of the use of property
went too far. When regulation reaches a certain magnitude, in most if not in
all cases there must be an exercise of eminent domain and compensation to
support the act. While property may be regulated to a certain extent, if
regulation goes too far it will be recognized as a taking.[82]
No formula or rule can be devised to answer the questions of what is too far
and when regulation becomes a taking. In Mahon, Justice Holmes recognized
that it was a question of degree and therefore cannot be disposed of by general
propositions. On many other occasions as well, the U.S. Supreme Court has
said that the issue of when regulation constitutes a taking is a matter of
considering the facts in each case. The Court asks whether justice and fairness
require that the economic loss caused by public action must be compensated
by the government and thus borne by the public as a whole, or whether the
loss should remain concentrated on those few persons subject to the public
action.[83]
What is crucial in judicial consideration of regulatory takings is that
government regulation is a taking if it leaves no reasonable economically
viable use of property in a manner that interferes with reasonable expectations
for use.[84] A regulation that permanently denies all economically beneficial
or productive use of land is, from the owners point of view, equivalent to a
taking unless principles of nuisance or property law that existed when the
owner acquired the land make the use prohibitable.[85] When the owner of
real property has been called upon to sacrifice all economically beneficial uses
in the name of the common good, that is, to leave his property economically
idle, he has suffered a taking.[86]
A regulation which denies all economically beneficial or productive use of
land will require compensation under the takings clause. Where a regulation
places limitations on land that fall short of eliminating all economically
beneficial use, a taking nonetheless may have occurred, depending on a
complex of factors including the regulations economic effect on the
landowner, the extent to which the regulation interferes with reasonable
investment-backed expectations and the character of government action.
These inquiries are informed by the purpose of the takings clause which is to
prevent the government from forcing some people alone to bear public
burdens which, in all fairness and justice, should be borne by the public as a
whole.[87]
A restriction on use of property may also constitute a taking if not reasonably
necessary to the effectuation of a substantial public purpose or if it has an
unduly harsh impact on the distinct investment-backed expectations of the
owner.[88]
The Ordinance gives the owners and operators of the prohibited
establishments three (3) months from its approval within which to wind up
business operations or to transfer to any place outside of the Ermita-Malate
area or convert said businesses to other kinds of business allowable within the
area. The directive to wind up business operations amounts to a closure of the
establishment, a permanent deprivation of property, and is practically
confiscatory. Unless the owner converts his establishment to accommodate an
allowed business, the structure which housed the previous business will be
left empty and gathering dust. Suppose he transfers it to another area, he will
likewise leave the entire establishment idle. Consideration must be given to
the substantial amount of money invested to build the edifices which the
owner reasonably expects to be returned within a period of time. It is apparent
that the Ordinance leaves no reasonable economically viable use of property in
a manner that interferes with reasonable expectations for use.
The second and third options to transfer to any place outside of the Ermita-
Malate area or to convert into allowed businessesare confiscatory as well. The
penalty of permanent closure in cases of subsequent violations found in
Section 4 of the Ordinance is also equivalent to a taking of private property.
The second option instructs the owners to abandon their property and build
another one outside the Ermita-Malate area. In every sense, it qualifies as a
taking without just compensation with an additional burden imposed on the
owner to build another establishment solely from his coffers. The proffered
solution does not put an end to the problem, it merely relocates it. Not only is
this impractical, it is unreasonable, onerous and oppressive. The conversion
into allowed enterprises is just as ridiculous. How may the respondent convert
a motel into a restaurant or a coffee shop, art gallery or music lounge without
essentially destroying its property? This is a taking of private property
without due process of law, nay, even without compensation.
The penalty of closure likewise constitutes unlawful taking that should be
compensated by the government. The burden on the owner to convert or
transfer his business, otherwise it will be closed permanently after a
subsequent violation should be borne by the public as this end benefits them
as a whole.
Petitioners cannot take refuge in classifying the measure as a zoning
ordinance. A zoning ordinance, although a valid exercise of police power,
which limits a wholesome property to a use which can not reasonably be made
of it constitutes the taking of such property without just compensation. Private
property which is not noxious nor intended for noxious purposes may not, by
zoning, be destroyed without compensation. Such principle finds no support
in the principles of justice as we know them. The police powers of local
government units which have always received broad and liberal
interpretation cannot be stretched to cover this particular taking.
Distinction should be made between destruction from necessity and eminent
domain. It needs restating that the property taken in the exercise of police
power is destroyed because it is noxious or intended for a noxious purpose
while the property taken under the power of eminent domain is intended for
a public use or purpose and is therefore wholesome.[89] If it be of public
benefit that a wholesome property remain unused or relegated to a particular
purpose, then certainly the public should bear the cost of reasonable
compensation for the condemnation of private property for public use.[90]
Further, the Ordinance fails to set up any standard to guide or limit the
petitioners actions. It in no way controls or guides the discretion vested in
them. It provides no definition of the establishments covered by it and it fails
to set forth the conditions when the establishments come within its ambit of
prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted
power to close down establishments. Ordinances such as this, which make
possible abuses in its execution, depending upon no conditions or
qualifications whatsoever other than the unregulated arbitrary will of the city
authorities as the touchstone by which its validity is to be tested, are
unreasonable and invalid. The Ordinance should have established a rule by
which its impartial enforcement could be secured.[91]
Ordinances placing restrictions upon the lawful use of property must, in order
to be valid and constitutional, specify the rules and conditions to be observed
and conduct to avoid; and must not admit of the exercise, or of an opportunity
for the exercise, of unbridled discretion by the law enforcers in carrying out
its provisions.[92]
Thus, in Coates v. City of Cincinnati,[93] as cited in People v. Nazario,[94] the U.S.
Supreme Court struck down an ordinance that had made it illegal for three or
more persons to assemble on any sidewalk and there conduct themselves in a
manner annoying to persons passing by. The ordinance was nullified as it
imposed no standard at all because one may never know in advance what
annoys some people but does not annoy others.
Similarly, the Ordinance does not specify the standards to ascertain which
establishments tend to disturb the community, annoy the inhabitants, and
adversely affect the social and moral welfare of the community. The cited case
supports the nullification of the Ordinance for lack of comprehensible
standards to guide the law enforcers in carrying out its provisions.
Petitioners cannot therefore order the closure of the enumerated
establishments without infringing the due process clause. These lawful
establishments may be regulated, but not prevented from carrying on their
business. This is a sweeping exercise of police power that is a result of a lack
of imagination on the part of the City Council and which amounts to an
interference into personal and private rights which the Court will not
countenance. In this regard, we take a resolute stand to uphold the
constitutional guarantee of the right to liberty and property.
Worthy of note is an example derived from the U.S. of a reasonable regulation
which is a far cry from the ill-considered Ordinance enacted by the City
Council.
In FW/PBS, INC. v. Dallas,[95] the city of Dallas adopted a comprehensive
ordinance regulating sexually oriented businesses, which are defined to
include adult arcades, bookstores, video stores, cabarets, motels, and theaters
as well as escort agencies, nude model studio and sexual encounter centers.
Among other things, the ordinance required that such businesses be licensed.
A group of motel owners were among the three groups of businesses that filed
separate suits challenging the ordinance. The motel owners asserted that the
city violated the due process clause by failing to produce adequate support for
its supposition that renting room for fewer than ten (10) hours resulted in
increased crime and other secondary effects. They likewise argued than the
ten (10)-hour limitation on the rental of motel rooms placed an
unconstitutional burden on the right to freedom of association. Anent the first
contention, the U.S. Supreme Court held that the reasonableness of the
legislative judgment combined with a study which the city considered, was
adequate to support the citys determination that motels permitting room
rentals for fewer than ten (10 ) hours should be included within the licensing
scheme. As regards the second point, the Court held that limiting motel room
rentals to ten (10) hours will have no discernible effect on personal bonds as
those bonds that are formed from the use of a motel room for fewer than ten
(10) hours are not those that have played a critical role in the culture and
traditions of the nation by cultivating and transmitting shared ideals and
beliefs.
The ordinance challenged in the above-cited case merely regulated the
targeted businesses. It imposed reasonable restrictions; hence, its validity was
upheld.
The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City
Mayor of Manila,[96] it needs pointing out, is also different from this case in
that what was involved therein was a measure which regulated the mode in
which motels may conduct business in order to put an end to practices which
could encourage vice and immorality. Necessarily, there was no valid
objection on due process or equal protection grounds as the ordinance did not
prohibit motels. The Ordinance in this case however is not a regulatory
measure but is an exercise of an assumed power to prohibit.[97]
The foregoing premises show that the Ordinance is an unwarranted and
unlawful curtailment of property and personal rights of citizens. For being
unreasonable and an undue restraint of trade, it cannot, even under the guise
of exercising police power, be upheld as valid.
B. The Ordinance violates Equal
Protection Clause
Equal protection requires that all persons or things similarly situated should
be treated alike, both as to rights conferred and responsibilities imposed.
Similar subjects, in other words, should not be treated differently, so as to give
undue favor to some and unjustly discriminate against others.[98] The
guarantee means that no person or class of persons shall be denied the same
protection of laws which is enjoyed by other persons or other classes in like
circumstances.[99] The equal protection of the laws is a pledge of the
protection of equal laws.[100] It limits governmental discrimination. The equal
protection clause extends to artificial persons but only insofar as their property
is concerned.[101]
The Court has explained the scope of the equal protection clause in this wise:
What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure
Administration: The ideal situation is for the laws benefits to be available to
all, that none be placed outside the sphere of its coverage. Only thus could
chance and favor be excluded and the affairs of men governed by that serene
and impartial uniformity, which is of the very essence of the idea of law. There
is recognition, however, in the opinion that what in fact exists cannot
approximate the ideal. Nor is the law susceptible to the reproach that it does
not take into account the realities of the situation. The constitutional guarantee
then is not to be given a meaning that disregards what is, what does in fact
exist. To assure that the general welfare be promoted, which is the end of law,
a regulatory measure may cut into the rights to liberty and property. Those
adversely affected may under such circumstances invoke the equal protection
clause only if they can show that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by the spirit of
hostility, or at the very least, discrimination that finds no support in reason.
Classification is thus not ruled out, it being sufficient to quote from the Tuason
decision anew that the laws operate equally and uniformly on all persons
under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different, both in the privileges conferred
and the liabilities imposed. Favoritism and undue preference cannot be
allowed. For the principle is that equal protection and security shall be given
to every person under circumstances which, if not identical, are analogous. If
law be looked upon in terms of burden or charges, those that fall within a class
should be treated in the same fashion, whatever restrictions cast on some in
the group equally binding on the rest.[102]
Legislative bodies are allowed to classify the subjects of legislation. If the
classification is reasonable, the law may operate only on some and not all of
the people without violating the equal protection clause.[103] The
classification must, as an indispensable requisite, not be arbitrary. To be valid,
it must conform to the following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class.[104]
In the Courts view, there are no substantial distinctions between motels, inns,
pension houses, hotels, lodging houses or other similar establishments. By
definition, all are commercial establishments providing lodging and usually
meals and other services for the public. No reason exists for prohibiting motels
and inns but not pension houses, hotels, lodging houses or other similar
establishments. The classification in the instant case is invalid as similar
subjects are not similarly treated, both as to rights conferred and obligations
imposed. It is arbitrary as it does not rest on substantial distinctions bearing a
just and fair relation to the purpose of the Ordinance.
The Court likewise cannot see the logic for prohibiting the business and
operation of motels in the Ermita-Malate area but not outside of this area. A
noxious establishment does not become any less noxious if located outside the
area.
The standard where women are used as tools for entertainment is also
discriminatory as prostitutionone of the hinted ills the Ordinance aims to
banishis not a profession exclusive to women. Both men and women have an
equal propensity to engage in prostitution. It is not any less grave a sin when
men engage in it. And why would the assumption that there is an ongoing
immoral activity apply only when women are employed and be inapposite
when men are in harness? This discrimination based on gender violates equal
protection as it is not substantially related to important government
objectives.[105] Thus, the discrimination is invalid.
Failing the test of constitutionality, the Ordinance likewise failed to pass the
test of consistency with prevailing laws.
C. The Ordinance is repugnant
to general laws; it is ultra vires
The Ordinance is in contravention of the Code as the latter merely empowers
local government units to regulate, and not prohibit, the establishments
enumerated in Section 1 thereof.
The power of the City Council to regulate by ordinances the establishment,
operation, and maintenance of motels, hotels and other similar establishments
is found in Section 458 (a) 4 (iv), which provides that:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
...
(4) Regulate activities relative to the use of land, buildings and structures
within the city in order to promote the general welfare and for said purpose
shall:
...
(iv) Regulate the establishment, operation and maintenance of cafes,
restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses,
and other similar establishments, including tourist guides and transports . . . .
While its power to regulate the establishment, operation and maintenance of
any entertainment or amusement facilities, and to prohibit certain forms of
amusement or entertainment is provided under Section 458 (a) 4 (vii) of the
Code, which reads as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
...
(4) Regulate activities relative to the use of land, buildings and structures
within the city in order to promote the general welfare and for said purpose
shall:
...
(vii) Regulate the establishment, operation, and maintenance of any
entertainment or amusement facilities, including theatrical performances,
circuses, billiard pools, public dancing schools, public dance halls, sauna
baths, massage parlors, and other places for entertainment or amusement;
regulate such other events or activities for amusement or entertainment,
particularly those which tend to disturb the community or annoy the
inhabitants, or require the suspension or suppression of the same; or, prohibit
certain forms of amusement or entertainment in order to protect the social and
moral welfare of the community.
Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns,
pension houses, lodging houses, and other similar establishments, the only
power of the City Council to legislate relative thereto is to regulate them to
promote the general welfare. The Code still withholds from cities the power
to suppress and prohibit altogether the establishment, operation and
maintenance of such establishments. It is well to recall the rulings of the Court
in Kwong Sing v. City of Manila[106] that:
The word regulate, as used in subsection (l), section 2444 of the Administrative
Code, means and includes the power to control, to govern, and to restrain; but
regulate should not be construed as synonymous with suppress or prohibit.
Consequently, under the power to regulate laundries, the municipal
authorities could make proper police regulations as to the mode in which the
employment or business shall be exercised.[107]
And in People v. Esguerra,[108] wherein the Court nullified an ordinance of the
Municipality of Tacloban which prohibited the selling, giving and dispensing
of liquor ratiocinating that the municipality is empowered only to regulate the
same and not prohibit. The Court therein declared that:
(A)s a general rule when a municipal corporation is specifically given
authority or power to regulate or to license and regulate the liquor traffic,
power to prohibit is impliedly withheld.[109]
These doctrines still hold contrary to petitioners assertion[110] that they were
modified by the Code vesting upon City Councils prohibitory powers.
Similarly, the City Council exercises regulatory powers over public dancing
schools, public dance halls, sauna baths, massage parlors, and other places for
entertainment or amusement as found in the first clause of Section 458 (a) 4
(vii). Its powers to regulate, suppress and suspend such other events or
activities for amusement or entertainment, particularly those which tend to
disturb the community or annoy the inhabitants and to prohibit certain forms
of amusement or entertainment in order to protect the social and moral
welfare of the community are stated in the second and third clauses,
respectively of the same Section. The several powers of the City Council as
provided in Section 458 (a) 4 (vii) of the Code, it is pertinent to emphasize, are
separated by semi-colons (;), the use of which indicates that the clauses in
which these powers are set forth are independent of each other albeit closely
related to justify being put together in a single enumeration or paragraph.[111]
These powers, therefore, should not be confused, commingled or consolidated
as to create a conglomerated and unified power of regulation, suppression and
prohibition.[112]
The Congress unequivocably specified the establishments and forms of
amusement or entertainment subject to regulation among which are
beerhouses, hotels, motels, inns, pension houses, lodging houses, and other
similar establishments (Section 458 (a) 4 (iv)), public dancing schools, public
dance halls, sauna baths, massage parlors, and other places for entertainment
or amusement (Section 458 (a) 4 (vii)). This enumeration therefore cannot be
included as among other events or activities for amusement or entertainment,
particularly those which tend to disturb the community or annoy the
inhabitants or certain forms of amusement or entertainment which the City
Council may suspend, suppress or prohibit.
The rule is that the City Council has only such powers as are expressly granted
to it and those which are necessarily implied or incidental to the exercise
thereof. By reason of its limited powers and the nature thereof, said powers
are to be construed strictissimi juris and any doubt or ambiguity arising out of
the terms used in granting said powers must be construed against the City
Council.[113] Moreover, it is a general rule in statutory construction that the
express mention of one person, thing, or consequence is tantamount to an
express exclusion of all others. Expressio unius est exclusio alterium. This maxim
is based upon the rules of logic and the natural workings of human mind. It is
particularly applicable in the construction of such statutes as create new rights
or remedies, impose penalties or punishments, or otherwise come under the
rule of strict construction.[114]
The argument that the City Council is empowered to enact the Ordinance by
virtue of the general welfare clause of the Code and of Art. 3, Sec. 18 (kk) of
the Revised Charter of Manila is likewise without merit. On the first point, the
ruling of the Court in People v. Esguerra,[115] is instructive. It held that:
The powers conferred upon a municipal council in the general welfare clause,
or section 2238 of the Revised Administrative Code, refers to matters not
covered by the other provisions of the same Code, and therefore it can not be
applied to intoxicating liquors, for the power to regulate the selling, giving
away and dispensing thereof is granted specifically by section 2242 (g) to
municipal councils. To hold that, under the general power granted by section
2238, a municipal council may enact the ordinance in question,
notwithstanding the provision of section 2242 (g), would be to make the latter
superfluous and nugatory, because the power to prohibit, includes the power
to regulate, the selling, giving away and dispensing of intoxicating liquors.
On the second point, it suffices to say that the Code being a later expression of
the legislative will must necessarily prevail and override the earlier law, the
Revised Charter of Manila. Legis posteriores priores contrarias abrogant, or later
statute repeals prior ones which are repugnant thereto. As between two laws
on the same subject matter, which are irreconcilably inconsistent, that which
is passed later prevails, since it is the latest expression of legislative will.[116]
If there is an inconsistency or repugnance between two statutes, both relating
to the same subject matter, which cannot be removed by any fair and
reasonable method of interpretation, it is the latest expression of the legislative
will which must prevail and override the earlier.[117]
Implied repeals are those which take place when a subsequently enacted law
contains provisions contrary to those of an existing law but no provisions
expressly repealing them. Such repeals have been divided into two general
classes: those which occur where an act is so inconsistent or irreconcilable with
an existing prior act that only one of the two can remain in force and those
which occur when an act covers the whole subject of an earlier act and is
intended to be a substitute therefor. The validity of such a repeal is sustained
on the ground that the latest expression of the legislative will should
prevail.[118]
In addition, Section 534(f) of the Code states that All general and special laws,
acts, city charters, decrees, executive orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly. Thus,
submitting to petitioners interpretation that the Revised Charter of Manila
empowers the City Council to prohibit motels, that portion of the Charter
stating such must be considered repealed by the Code as it is at variance with
the latters provisions granting the City Council mere regulatory powers.
It is well to point out that petitioners also cannot seek cover under the general
welfare clause authorizing the abatement of nuisances without judicial
proceedings. That tenet applies to a nuisance per se, or one which affects the
immediate safety of persons and property and may be summarily abated
under the undefined law of necessity. It can not be said that motels are
injurious to the rights of property, health or comfort of the community. It is a
legitimate business. If it be a nuisance per accidens it may be so proven in a
hearing conducted for that purpose. A motel is not per se a nuisance
warranting its summary abatement without judicial intervention.[119]
Notably, the City Council was conferred powers to prevent and prohibit
certain activities and establishments in another section of the Code which is
reproduced as follows:
Section 458. Powers, Duties, Functions and Compensation. (a) The
sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and
effective city government, and in this connection, shall:
...
(v) Enact ordinances intended to prevent, suppress and impose appropriate
penalties for habitual drunkenness in public places, vagrancy, mendicancy,
prostitution, establishment and maintenance of houses of ill repute, gambling
and other prohibited games of chance, fraudulent devices and ways to obtain
money or property, drug addiction, maintenance of drug dens, drug pushing,
juvenile delinquency, the printing, distribution or exhibition of obscene or
pornographic materials or publications, and such other activities inimical to
the welfare and morals of the inhabitants of the city;
...
If it were the intention of Congress to confer upon the City Council the power
to prohibit the establishments enumerated in Section 1 of the Ordinance, it
would have so declared in uncertain terms by adding them to the list of the
matters it may prohibit under the above-quoted Section. The Ordinance now
vainly attempts to lump these establishments with houses of ill-repute and
expand the City Councils powers in the second and third clauses of Section
458 (a) 4 (vii) of the Code in an effort to overreach its prohibitory powers. It is
evident that these establishments may only be regulated in their
establishment, operation and maintenance.
It is important to distinguish the punishable activities from the establishments
themselves. That these establishments are recognized legitimate enterprises
can be gleaned from another Section of the Code. Section 131 under the Title
on Local Government Taxation expressly mentioned proprietors or operators
of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and
lodging houses as among the contractors defined in paragraph (h) thereof. The
same Section also defined amusement as a pleasurable diversion and
entertainment, synonymous to relaxation, avocation, pastime or fun; and
amusement places to include theaters, cinemas, concert halls, circuses and
other places of amusement where one seeks admission to entertain oneself by
seeing or viewing the show or performances. Thus, it can be inferred that the
Code considers these establishments as legitimate enterprises and activities. It
is well to recall the maxim reddendo singula singulis which means that words in
different parts of a statute must be referred to their appropriate connection,
giving to each in its place, its proper force and effect, and, if possible,
rendering none of them useless or superfluous, even if strict grammatical
construction demands otherwise. Likewise, where words under consideration
appear in different sections or are widely dispersed throughout an act the
same principle applies.[120]
Not only does the Ordinance contravene the Code, it likewise runs counter to
the provisions of P.D. 499. As correctly argued by MTDC, the statute had
already converted the residential Ermita-Malate area into a commercial area.
The decree allowed the establishment and operation of all kinds of commercial
establishments except warehouse or open storage depot, dump or yard, motor
repair shop, gasoline service station, light industry with any machinery or
funeral establishment. The rule is that for an ordinance to be valid and to have
force and effect, it must not only be within the powers of the council to enact
but the same must not be in conflict with or repugnant to the general law.[121]
As succinctly illustrated in Solicitor General v. Metropolitan Manila
Authority:[122]
The requirement that the enactment must not violate existing law explains
itself. Local political subdivisions are able to legislate only by virtue of a valid
delegation of legislative power from the national legislature (except only that
the power to create their own sources of revenue and to levy taxes is conferred
by the Constitution itself). They are mere agents vested with what is called the
power of subordinate legislation. As delegates of the Congress, the local
government units cannot contravene but must obey at all times the will of their
principal. In the case before us, the enactment in question, which are merely
local in origin cannot prevail against the decree, which has the force and effect
of a statute.[123]
Petitioners contend that the Ordinance enjoys the presumption of validity.
While this may be the rule, it has already been held that although the
presumption is always in favor of the validity or reasonableness of the
ordinance, such presumption must nevertheless be set aside when the
invalidity or unreasonableness appears on the face of the ordinance itself or is
established by proper evidence. The exercise of police power by the local
government is valid unless it contravenes the fundamental law of the land, or
an act of the legislature, or unless it is against public policy or is unreasonable,
oppressive, partial, discriminating or in derogation of a common right.[124]
Conclusion
All considered, the Ordinance invades fundamental personal and property
rights and impairs personal privileges. It is constitutionally infirm. The
Ordinance contravenes statutes; it is discriminatory and unreasonable in its
operation; it is not sufficiently detailed and explicit that abuses may attend the
enforcement of its sanctions. And not to be forgotten, the City Council under
the Code had no power to enact the Ordinance and is therefore ultra vires, null
and void.
Concededly, the challenged Ordinance was enacted with the best of motives
and shares the concern of the public for the cleansing of the Ermita-Malate
area of its social sins. Police power legislation of such character deserves the
full endorsement of the judiciary we reiterate our support for it. But inspite of
its virtuous aims, the enactment of the Ordinance has no statutory or
constitutional authority to stand on. Local legislative bodies, in this case, the
City Council, cannot prohibit the operation of the enumerated establishments
under Section 1 thereof or order their transfer or conversion without
infringing the constitutional guarantees of due process and equal protection
of laws not even under the guise of police power.

WHEREFORE, the Petition is hereby DENIED and the decision of the Regional
Trial Court declaring the Ordinance void is AFFIRMED. Costs against
petitioners.

SO ORDERED.